How "Big Tech" is changing Austria

“Big Tech” is conquering the world at a rapid pace and fundamentally changing all our lives. On the one hand, many new services – from search and shopping platforms to social networks and cloud services to AI systems – are of great benefit to us. On the other hand, however, there is a whole series of downsides, such as how our data is handled. In any case, ‘big tech’ is bringing about a dramatic shift in economic activity and the distribution of power in the world.

Europe is increasingly falling behind: among the 100 largest Big Tech companies, there are just eleven from Europe, with the best-placed being in 13th position. Seven US companies are in the lead, followed by Asian firms. Well-founded analyses, such as the recent Draghi Report, see Europe's digitalisation backlog as the main reason for its declining productivity compared to the US – a trend that has been ongoing since the mid-1990s.

What could Europe and Austria do to improve the situation? One fundamental problem here is that future development is completely open. For example, who would have thought just two years ago how much generative artificial intelligence à la Chat-GPT would intervene in our lives and work?

This question is also on the minds of researchers at the AIT Austrian Institute of Technology – they recently published a ‘Foresight Brief’ on this topic. ‘We can and must not necessarily assume that Big Tech will continue with the status quo, but that other futures are also possible. Past experience shows that both globalisation and technological trajectories can also slow down, stop or even reverse,’ explains AIT researcher Bernhard Dachs.

At the AIT Center for Innovation Systems & Policy, workshops were held with renowned stakeholders from this sector to explore possible courses of action. These were based on a study conducted by Sandro Mendonça (ISCTE Institute of the University of Lisbon) on behalf of the European Commission, which used a scenario analysis to create possible futures for big tech in Europe.

These scenarios, looking ahead to 2040, are based on two dimensions: the first is the future development of globalisation. After all, Big Tech needs open, global markets in which the new technologies can be scaled up. However, globalisation is currently clearly losing momentum, there are major power-political tensions, isolationism is on the rise, and there is a risk of new blocs forming. The second dimension is the extent to which Big Tech companies continue to maintain their dominant position and can thus exploit their economies of scale. It is perfectly conceivable that – as has happened repeatedly in the past – the players that are dominant today will be replaced by new competitors in no time at all. These two dimensions are closely related: a de-globalised world would also allow for fewer globally active Big Tech corporations.

The following four scenarios arise from the combination of these two dimensions:

• Winners Tech All: a future in which globalisation continues to dominate the world economy and big tech can maintain its position in the future. The US remains the only superpower and sets the main political and economic agendas. In this scenario, policy options include international cooperation on the regulation of big tech, a strengthening of competition law and investment in education and entrepreneurship.
• Pax Technologica assumes a future in which deglobalisation leads to the formation of economic blocs in which politics determines the rules of trade. The governments of the countries in each bloc protect their markets and promote their own Big Tech companies, thus limiting the influence of global Big Tech corporations in their own economic area. The EU should invest more in R&D and the development of its own big tech companies, as well as in education and riskier innovations.
• Re-matching describes a scenario in which globalisation has passed its peak and de-globalising tendencies are on the rise. There are new coalitions between governments, companies and civil society that, among other things, also limit the importance of Big Tech. Many of today's Big Tech companies cannot maintain their position and are being replaced by new companies. The scenario suggests an active industrial policy to optimally support the emergence of new digital corporations.
• Closet Liberalism is the term used for a scenario involving a combination of ongoing globalisation of markets and a simultaneous loss of importance of national governments. Today's Big Tech companies are coming under pressure from new competitors. Digital technologies are increasingly enabling peer-to-peer activities without central intermediaries, and are making a much more decentralised economic model possible. In this kind of situation, it makes sense to promote R&D activities in existing agglomerations and to develop new technologies on the basis of existing local expertise.

However different the possible future developments and specific options for action may be, there are also some options for action that will put Europe in a better position in any case. In particular, this concerns improving the framework conditions for European Big Tech companies. Specifically, this means completing the single market for digital services, advancing the capital markets union and making Europe more attractive to talent from outside the EU.

To improve the quality of the location for high-tech research, the experts recommend: promoting start-ups and academic spin-offs, more flexible regulations to support innovation, expanding the digital infrastructure and promoting its creative use by companies.

The options for action at the national policy level are significantly more limited. Austrian policymakers could help to reduce imbalances by strengthening digital content in education and training and by raising awareness of data protection and consumer rights.

At first glance, Austria's options for action appear to be greater in scenarios that assume a lower degree of globalisation and increased bloc-building. ‘Within a sealed-off European Union, Austria would also have a good chance of developing into an important location for European Big Tech companies, because the country is already one of the most R&D-intensive member states in the EU,’ according to the experts.

However, there are two serious negative effects to consider: on the one hand, Austria's economic performance is highly dependent on imports and exports. And on the other hand, de-globalisation would hinder international knowledge flows and impair the quality of research, which depends to a large extent on the exchange between scientists and knowledge bases. Therefore, a continuation of the globalisation trend would be more advantageous for Austria as a business location.