Sources of Innovation in Generative AI

Innovation drives competition, so when designing competition policy in an industry we need to understand the sources of innovation in that industry. This note considers the institutions that shape innovation in generative AI and examines how they affect competition policy. I argue that generative AI is a highly complex and inherently distributed technology, both in the capabilities it requires and resources it must assemble. It is also manifestly a general-purpose technology, and thus does not sit in any one industry or sector and that the competitive dynamics of the technology are significantly affected by discovery of new uses.