The regulatory dilemma: an interdisciplinary perspective into how regulation can be used to impact innovation

Abstract

Innovation is an emergent property of a complex socioeconomic system. It is an evolutionary process that through the interactions of entities within their environment it gives rise to something new. This process of innovation continually disrupts the modus operandi, thus allowing the system to evolve over time. However, failure to anticipate the future states of the system poses significant systemic risk – as witnessed by the Financial Crisis of 2008. Therefore, policy-makers need sufficient and reliable knowledge as to how to steer the system towards better outcomes for society. Problematically, understanding this relationship can often be beyond the scope of a single discipline or area of research practice. Therefore, this thesis is organised around the idea as to how regulation can be used to impact innovation through an interdisciplinary perspective. Hence, the first paper systematically analyses the research area by conglomerating the fragmented literature that reside around this domain. This is in order to identify gaps, themes, relationships and deficiencies within the research stream. The second paper then looks towards agent-based modelling – a method for measuring complex systems – as a suitable way to answer the issues raised by the first manuscript. This was achieved by breaking up the agent-based literature to analyse its effectiveness for understanding this relationship. From this the author systematically compared and contrasted the various design specifications of the agent-based models, thus providing a relevant framework to analyse how different policies can shape the market mechanism through various policy objectives. These findings are subsequently converged to frame the final paper, which the author calls the Regulatory Dilemma. This aims to measure the aggressiveness of a variety of policy-instruments to see what effect they have on the system via agent-based simulation. Hence, the research contributes to existing literature on how regulation shapes the innovation process; however, specifically facilitating the gap that analyses the stringency of two policy instruments that target towards both the inventor (i.e. through rewarding invention) and the imitator (i.e. penalising imitation). Consequently, this presents an interesting insight into how regulation can impact the dynamics of the system. It also seems to prove a useful tool to transcend borders set by standard analytical models and open up promising avenues for future policy design. More research plans to extend this model with greater adaption and realism for the pre-assessment as to the effectiveness of the proposed policies.

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ORCID for Vadim Grinevich: orcid.org/0000-0002-3207-3680

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