No 2014/29 Institutions and Regulations in Innovation Systems

Effects, Problems and Innovation Policy Design

Abstract

Institutions (including regulations) are constitutive elements of innovation systems, and therefore cornerstones of innovation policy. Focusing on (soft and hard) regulation, the paper identifies the most salient regulatory areas from the perspective of the innovation system. When asking about the effects of regulation on innovation, the paper argues that there are three key issues that need careful empirical analysis; namely, whether regulation is effective and efficient in terms of reducing uncertainty and generating incentives, whether it is able to generate ultimately wider social benefits for the innovativeness of the society at large; and the extent to which regulation is adapting to new (social, economic and technological) contexts and is socially legitimate and accepted. These are potentially the three problems that innovation policy needs to address in this area. This provides guidance for the design and re-design of innovation policy, so that policy makers may analyse empirically the social dynamics actually generated by regulation rather than simply assuming deductively their effects.