An International Research Handbook
Edited by Ruud E. Smits, Stefan Kuhlmann and Phillip Shapira
Chapter 10: The Use of the Regulatory Framework for Innovation Policy
Knut Blind INTRODUCTION Topics of regulation, innovation and competitiveness in global markets have been discussed for several decades. However, little has been done in a comprehensive way to understand the effect of regulation on the ability of industries to innovate and be competitive.! The debate has taken place at the level of anecdotal evidence and with poor systematic empirical foundations. Moreover, surveying those studies which are available provides no clear picture as to whether the negative impacts of regulation outweigh the positive effects. For countries that are members of the Organisation for Economic Co-Operation and Development (OECD), Bassanini and Ernst (2002) find a negative correlation between the intensity of product market regulations and the intensity of research and development expenditure. Swann (2005) shows that for a significant share of British companies the content of regulations is both an important source for innovation, but also a severe obstacle for the innovation activities. Following the seminal paper of Porter and van der Linde (1995), several further contributions (e.g. Jaffe et al. 1995; Jaffe & Palmer 1997) produce ambivalent results regarding the influence of regulation on the development of new environmental technologies. Furthermore, most of the approaches assume a static framework, not recognising the long-term dynamic feedback loops between regulation and innovation (an exception is Kemp 1998) or even the interactions of the institutions and actors in the innovation systems. There are discussions among innovation policy makers to extend their focus on the regulatory framework as a possible policy instrument (Blind et al. 2004)...
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