Selected Attributes of Regulations and Their Theoretical Impacts on Innovation
|Command and control||Higher||-||-|
|Compliance value added||Lower||Lower||-|
|Moving target||Lower||Less||None/ Incremental|
• Social regulation tends to stimulate social innovation; however, more often than not, it stifles market innovation.
• Some evidence suggests more stringent and disruptive social regulation promotes more radical innovation, while the “moving target approach” of gradually increasing stringency over time results in incremental innovation.
• Regulation that does not require innovation for compliance will generally stifle innovation, although it may spur circumventive innovation if the firm or industry can find a path to escape the regulatory constraints.
• Regulation that does require compliance innovation has an unclear impact on innovation.
• A tradeoff exists between market innovation that benefits the firms and that which serves only to meet the compliance standards of regulation.