The Evolution of Regulation and its Impact on Innovation

One of the outcomes of the Understanding Innovation project is that we discerned a pattern in the way in which regulation “attaches” to innovation. We see a “free innovation” period for a given technology in its early stages, but then, generally within ten years, regulation catches up to the technology, thereby commencing a “costly innovation period” on improvements to the original technology. The legal “remedy” for the costly innovation period has been to offer intellectual property protection to grant monopoly. We want to explore the impact of this evolution of regulation on innovation and whether it is possible to time shift/delay the start of the costly innovation period. Most academic discussions in this area focus on how to reduce the costs of the costly innovation period (typically with minor tweaks to IP law), but we will focus on how to postpone the costly innovation period in the first instance. Eric von Hippel (MIT) ignited this topic at our recent Squaw Valley conference by highlighting the robustness of free innovation. We believe our interdisciplinary perspective will cast critical new light here.