The Impact of Regulation on Innovation

Nesta Working Paper 12/02
Issued: January 2012
JEL Classification: K2; O38
Keywords: regulation, innovation


This paper is part of the Compendium of Evidence on the Effectiveness of Innovation Policy Intervention. It examines the evidence on the influence of various types of regulation on innovation. Based on a conceptual approach distinguishing between the positive incentive functions of regulations and the negative compliance burden, the study covers economic, social and institutional regulations. Existing empirical analyses are surveyed, which are characterised by rather heterogeneous methodological approaches, data bases and results.

In summary, the numerous empirical studies on the impact of different types of regulation on innovation present a rather heterogeneous picture both regarding the type of regulation, the sectors, the companies and the time horizon of the impacts. Finally, it has to be noted that most quantitative studies about the impact of regulations are not able to distinguish between the influence of changes in the legislation and of their enforcement and the related compliance of companies.

Research gaps still exist in the development of appropriate indicators of the regulatory framework. Furthermore, the processes within companies to react to regulations deserve more attention to understand the rather heterogeneous impacts on innovations. Finally, regulations are per se not only exogenous to companies, but often there is close interaction between regulators and the regulated companies, which should further explain some of the existing ambivalence.


Knut Blind

The Nesta Working Paper Series is intended to make available early results of research undertaken or supported by Nesta and its partners in order to elicit comments and suggestions for revisions and to encourage discussion and further debate prior to publication (ISSN 2050-9820). The views expressed in this working paper are those of the author(s) and do not necessarily represent those of Nesta.