Regulation-induced Technological Change to Achieve Sustainable Development
(2018)
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- Abstract
- The transition toward sustainability requires significant, rather than incremental, technological change. It is, therefore, of the utmost importance to identify the sources, drivers and development pathways of technological change. Evolutionary pathways are unlikely to achieve the ambitious change needed. We thus argue for a paradigm shift toward what we would describe as [r]evolutionary dynamics. A limitation of the stimulus-response model and the Porter hypothesis of regulation-induced innovation is its focus on the incumbent firms' reaction to regulation. The new entrants' dynamics are missing. What we propose is in the same vein as Schumpeter's creative destruction, with the effect of entry driven by regulation on innovation. We review the literature to identify instances of stringent regulatory shocks that are technology-forcing. We show that stringent regulation, when properly designed and accompanied with the right economic incentives, leads to disruptive rather than sustaining innovations. Incidentally, these innovations may have a significant positive impact on economic performance, the environment and worker health and safety. The evidence provided may improve the acceptability of stringent regulation at the political level.
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Citations
Bitat, A., & Ashford, N. (2018). Regulation-induced Technological Change to Achieve Sustainable Development. https://hdl.handle.net/2078.5/268020