Document(s): 

39-how_can_eu_legislation_enable_and-or_disable_innovation.pdf

Author(s): 

Jacques Pelkmans, Andrea Renda

Year of publication: 

2014

The EC study focuses on the multi-faceted, ambiguous and complex relationship between (EU) regulation and innovation in the economy, and discusses the innovation enhancing potential of certain regulatory approaches as well as factors that often reduce incentives to innovate. We adopt an 'ecosystem' approach to both regulation and innovation, and study the interactions between the two ecosystems. This general analysis and survey is complemented by seven case studies of EU regulation enabling and disabling innovation. The case studies are preceded by a broader contextual analysis of trends in EU regulation over the last three decades, showing the significant transformation of the nature and quality of EU regulation, largely in the deepened internal market.
Our findings include the following. Regulation can at times be a powerful stimulus to innovation. EU regulation matters at all stages of the innovation process. Different types of regulation can be identified in terms of innovation impact: general or horizontal, innovation-specific and sector-specific regulation. More prescriptive regulation tends to hamper innovative activity, whereas the more flexible EU regulation is, the better innovation can be stimulated. Lower compliance and red-tape burdens have a positive effect on innovation.
We recommend to incorporate a specific test on innovation impacts in the ex ante impact assessment of EU legislation as well as in ex post evaluation. There is ample potential for fostering innovation by reviewing the EU regulatory acquis.