In 2006, Disney was lagging in commercial and creative output, failing at the box office and losing its filmmaking magic. In this time of crisis, Disney spent $7.4 billion to acquire Pixar, which was on the brink of bankruptcy.

Pixar talent revitalized Disney’s animation team, introduced advanced 3D animation technology, and brought in massive revenue, reviving Disney’s reputation for blockbuster hits like Tangled and Frozen. It is one of the most celebrated turnarounds in entertainment history, and it only happened because a large corporation was allowed to buy a struggling startup.

Yet today, some policymakers are pushing to ban exactly that. The argument sounds appealing: big corporations gobble up small companies to kill competition, so why not stop them? The problem is that a blanket ban doesn’t just stop bad acquisitions. It removes one of the only two ways a startup can ever succeed, and in doing so, it freezes the market.

Startups have two paths to financial success: go public or get acquired. Going public sounds straightforward but is extraordinarily difficult in practice. Companies give up 7 percent of their initial proceeds to sell shares, face $4.2 million in process costs, and $2 million in federal filing requirements alone. Markets targeted by startups must also grow consistently, or investors become afraid and flee.

Snapchat went public in 2017, but low revenues pushed the company to lay off workers, and the stock was down nearly 40 percent from its debut price within the year. Instagram, by contrast, was acquired by Facebook and thrived. Facebook upgraded its servers and plugged it into their ad platform, and Instagram Stories surpassed Snapchat’s daily active users within a year. The difference between those two outcomes didn’t manifest due to a tangible difference in talent or product quality, but rather access to resources that only a large firm could provide.

90 percent of independent startups fail. For most founders, not having a clear exit strategy means inevitable burnout, debt, or bankruptcy. Venture capitalists face the same logic: if they can’t eventually liquidate their investments, they won’t risk their capital in the first place.

Without investors to back founders, there is simply no startup ecosystem. A 2017 analysis of acquisition market activity across 48 countries found that nations with policies that obstruct acquisitions have significantly lower startup investment activity. The capital dries up, the founders don’t materialize, and the next Pixar never gets built.

This matters far beyond American borders. The center of the global startup ecosystem is increasingly shifting toward the major powers of the Pacific Rim: the tech hubs of Shenzhen, Singapore, Seoul, and Tokyo, and on the Latin American side, São Paulo and Santiago. These players are no longer on the periphery like they once were. China alone produces more STEM graduates annually than the United States and Europe combined, and its technology firms have become crucial global competitors in artificial intelligence, semiconductors, and consumer electronics.

The US-China competition over these industries has demonstrated to the international community that startup acquisition is both a financial mechanism and a geopolitical one, since it determines which countries are allowed to benefit from and distribute the next generation of critical technology. A ban not only hurts American founders but directly advantages state-backed Chinese firms, which face no such restrictions and can freely utilize startup talent and technology. While on one hand, American policymakers waste time debating whether to restrict acquisitions, Beijing is actively encouraging them and advancing its national power.

Moving past the principled question of who gets to innovate is the practical consideration of what innovation looks like in a real, Capitalist-driven world. A promising idea coming out of a two-person startup in a garage is very different from that same idea reaching hundreds of millions of users worldwide. The gap between those two very different stages is infrastructure: platforms, data systems, distribution networks, and the institutional capacity to sustain years of research and development through failed experiments. These are things only large firms have.

DeepMind, an AI research lab aimed at using artificial intelligence to solve complex scientific problems, was acquired by Google for roughly $650 million. Integrated into Google’s existing systems and data infrastructure, DeepMind created far greater value than it ever could have independently, producing breakthroughs in protein folding research that have reshaped biology.

Before Android was acquired by Google in 2005, it employed fewer than ten people, had no actual product, and was close to shutting down entirely. It is now the world’s most widely used mobile operating system, running on billions of devices across every continent. Startups are good at the initial spark of innovation, but large companies are good at turning that spark into something the rest of the world can actually use.

Startup acquisitions also bring internal benefits to its human resources. When a company is acquired, employees are typically brought on by the acquiring firm, receiving job stability, better compensation, and significant payouts from equity shares accumulated during years of startup-level salaries and punishing hours.

For workers who bet their early careers on an unproven company, an acquisition is often the moment that bet finally pays off. And when founders successfully exit, they tend to start again. Executives like Marc Cuban, Peter Thiel, and Marc Andreessen used acquisition exits to go on and create further companies, funds, and tens of thousands of jobs. Restricting acquisitions cuts off the entire cycle of serial entrepreneurs that produces the next generation of founders and the companies they build.

The goal of good policy should be to stop corporations from abusing market power, not to eliminate the mechanism through which most innovation reaches the world. Targeted regulation preserves that mechanism. A ban destroys it. And in an era where the global competition for technological leadership is accelerating, destroying it is a cost we cannot afford.