Regulation for innovation sounds like an oxymoron but, for regulated developed economies to retain a competitive edge, they need to understand how innovators and regulators can work well together. Digital technologies allow innovations to spread so fast that traditional ponderous regulatory systems can become a major barrier for innovators. Even though innovators might provide the market entry the regulators require to solve their regulatory task.
NESTA (the leading UK innovation funder) is starting to talk to people about its forward strategy. It’s my view that NESTA should put some energy into studying and communicating the types of regulation that work well with innovation. This will stand NESTA well across its portfolio, especially given that NESTA as an endowment can take a very long view.
NESTA’s recent Creative Economy Manifesto highlights the need for more flexible regulation in the communications sector. ‘To ensure that the next generation of the Internet is truly open. This calls for contestable creative economy markets, well supervised by competition authorities which have the information and authority to act speedily and effectively when there are concerns about market abuse.’
Some components from the very wide range of regulation in the UK have worked well for regulating the most serious issues and maintaining public confidence. Even though this regulation can be qualitative and societal not quantitative. It was a regulatory advantage in the UK that allowed the Roslin team to clone Dolly the sheep and poor regulation in the USA that held the Americans back. I personally always admire regulation of ethical issues in medicine, given the huge issues at stake, when compared to the heat and light around say distasteful content.
Politicians and media startled by sudden change or with their own agendas now respond faster due to the very digital media that drive innovation. This political response can often translate into regulatory action in machinery not equipped for the innovation suddenly dropped into it. Knee jerk reactions to sudden digital innovation risk repeats of the men with red flags made to walk in front of the first cars so as not to startle horses.
In economic regulation market entry is usually highly desirable yet the small companies that are new entrants don’t have the capacity to engage with the meeting and document-driven approach of many regulatory processes.
Yet at the same time a well-ordered process might help to avert threats of knee jerk action by building some thinking and cooling-off time into decision making.
Government officials whose numbers have been reduced in the austerity drive are often swamped just keeping up with the demands of well funded existing lobbies who have monopolised relationships with politicians of government and opposition. Officials don’t have the time to form new networks among market entrants – which is time consuming as they are by default not ‘organised’. I was particularly struck by this when suddenly becoming engaged in the Leveson/bloggers regulation issue – an over worked DCMS team didn’t really have an intelligence network of bloggers it could call on.
NESTA has the opportunity to trawl through the regulatory play book in the UK and elsewhere to extract components of good regulation for innovation to inform all those constructing or adapting regulatory regimes. Work in new fields should always include a long term perspective on regulation in that sector and an attempt to lodge the issues with the Government Department and Select Committee responsible.
Authors Note: In my civil service career i was heavily involved in the creation of OFCOM via the Communications White Paper and the Office of Communications Act. I went to be the civil service advisor in the Downing Street Policy Unit on media regulation from 2001-2004. I was also involved in the deregulation of alcohol and entertainment licensing and the transformation of gambling regulation, not all of which turned out as intended. In the 1990s I was Private Secretary to the Science Energy and Industry Ministers from 1996-1998 which gave me a birds eye view of substantial regulatory changes in gas and electricity regulation as well as the introduction of the Competition Act and the creation of the Internet Watch Foundation.
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