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The Effects of Regulation on Research and Development: Theory and Evidence

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  • Mayo, John W
  • Flynn, Joseph E

Abstract

While other aspects of the effects of regulation on resource allocation have received considerable attention, the impact of regulation on the innovative p ropensities of regulated firms has generated only limited and somewha t tenuous evidence. Accordingly, this article investigates the effect s of regulation and firm structure on research and development (R&D) expenditures. A simple model of the behavior of a firm under a rate-o f-return regulation suggests that both the stringency of the allowed rate-of-return constraint and the inclusion or exclusion of R&D in a firm's rate base will be key determinants of firm level R&D expenditu res. The empirical results strongly support the theoretical model. Copyright 1988 by the University of Chicago.

Suggested Citation

  • Mayo, John W & Flynn, Joseph E, 1988. "The Effects of Regulation on Research and Development: Theory and Evidence," The Journal of Business, University of Chicago Press, vol. 61(3), pages 321-336, July.
    • Handle: RePEc:ucp:jnlbus:v:61:y:1988:i:3:p:321-36
    DOI: 10.1086/296435
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    Citations

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    Cited by:

    1. Archana Hingorani & Karen Shastri & Kuldeep Shastri, 1994. "Product Regulation and Stock Prices: The Case of the US Food and Drug Administration," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(2), pages 163-178.
    2. Schmitt, Stephan & Kucsera, Denes, 2013. "The Impact of the Regulatory Reform Process on R&D Investment of European Electricity Utilities," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80035, Verein für Socialpolitik / German Economic Association.
    3. Tooraj Jamasb & Michael Pollitt, 2005. "Deregulation and R&D in network industries: the case of the electricity industry," Working Papers EPRG 0502, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    4. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
    5. Meeus, Leonardo & Saguan, Marcelo, 2011. "Innovating grid regulation to regulate grid innovation: From the Orkney Isles to Kriegers Flak via Italy," Renewable Energy, Elsevier, vol. 36(6), pages 1761-1765.
    6. T. Jamasb & R. Nepal, 2015. "Issues and Options in the Economic Regulation of European Network Security," Competition and Regulation in Network Industries, Intersentia, vol. 16(1), pages 2-23, March.
    7. Müller, Christine & Growitsch, Christian & Wissner, Matthias, 2010. "Regulierung und Investitionsanreize in der ökonomischen Theorie. IRIN Working Paper im Rahmen des Arbeitspakets: Smart Grid-gerechte Weiterentwicklung der Anreizregulierung," WIK Discussion Papers 349, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    8. Jamasb, Tooraj & Pollitt, Michael, 2008. "Liberalisation and R&D in network industries: The case of the electricity industry," Research Policy, Elsevier, vol. 37(6-7), pages 995-1008, July.
    9. Yoonhwan Oh & Jungsub Yoon & Jeong-Dong Lee, 2016. "Evolutionary Patterns of Renewable Energy Technology Development in East Asia (1990–2010)," Sustainability, MDPI, vol. 8(8), pages 1-24, July.
    10. Dierk Bauknecht, 2011. "Incentive Regulation and Network Innovations," RSCAS Working Papers 2011/02, European University Institute.
    11. Lyon, Thomas P. & Huang, Haizhou, 1997. "Innovation and imitation in an asymmetrically-regulated industry," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 29-50, February.

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