Governance, Regulation and Innovation
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Governance, Regulation and Innovation

Theory and Evidence from Firms and Nations

Edited by Mehmet Ugur

This book aims to disentangle the complex relationship between innovation and its potential determinants, paying special attention to the roles of governance and regulatory frameworks, and the ways in which the latter interact with other drivers of innovation such as competition and the innovator’s closeness to the technology frontier.
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Chapter 7: Regulation and ICT capital input: empirical evidence from 10 OECD countries

Simon Porcher


Over the past twenty years, European governments have clearly aimed at increasing growth by encouraging innovation, which is assumed to be positively related to product-market deregulation and resulting competition. This approach has been evident both in the Single Market program of the early 1990s which aimed to harmonize national regulations and in the so-called Lisbon Strategy (2000) which aimed at increasing the share of research and development (R & D) expenditures in GDP. Both projects have considered deregulation and market-opening reforms as means to foster innovation. One of the assumptions that underpin the Lisbon Strategy is that economic competitiveness depends on increased investments in information and communications technologies (ICT). This assumption is justified by referring to the experience of the United States, where economic growth was underpinned by high sectoral productivity gains that, in turn, were related to successful adoption of ICT. Indeed, labour productivity growth in the United States escalated from 1.1 per cent in 1990–95 to 2.5 percent in 1995–2000 while it slowed down or remained stable in most European countries (van Ark et al., 2003).

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