When Risks Cannot Be Seen: Regulating Uncertainty in Emerging Technologies

55 Pages Posted: 22 Jul 2016 Last revised: 23 May 2017

See all articles by Jaime Bonnin Roca

Jaime Bonnin Roca

Eindhoven University of Technology (TUE) - Department of Industrial Engineering and Innovation Sciences

Parth Vaishnav

Carnegie Mellon University - Department of Engineering & Public Policy

M. Granger Morgan

Carnegie Mellon University - Department of Engineering and Public Policy

Joana Mendonça

Technical University of Lisbon (UTL)

Erica R.H. Fuchs

Department of Engineering and Public Policy, Carnegie Mellon University

Date Written: July 7, 2016

Abstract

Commercializing an emerging technology that employs an immature production process can be challenging, particularly when there are many different sources of uncertainty. In industries with stringent safety requirement, regulatory interventions that ensure safety while maintaining incentives for innovation can be particularly elusive. We use the extreme case of metal additive manufacturing (an emerging technology with many sources of process uncertainty) in commercial aviation (an industry where lapses in safety can have catastrophic consequences) to unpack how the characteristics of a technology may influence the options for regulatory intervention. Based on our findings, we propose an adaptive regulatory framework in which standards are periodically revised and in which different groups of companies are regulated differently as a function of their technological capabilities. We conclude by proposing a generalizable framework for regulating emerging process-based technologies in safety-critical industries in which the optimal regulatory configuration depends on the industry structure (number of firms), the performance and safety requirements, and the sources of technological uncertainty.

Keywords: additive manufacturing, technological uncertainty, risk regulation, aviation, adaptive regulation

JEL Classification: O250, O310, O320, O330, O380

Suggested Citation

Bonnin Roca, Jaime and Vaishnav, Parth and Morgan, M. Granger and Mendonça, Joana and Fuchs, Erica Renee, When Risks Cannot Be Seen: Regulating Uncertainty in Emerging Technologies (July 7, 2016). Available at SSRN: https://ssrn.com/abstract=2812535 or http://dx.doi.org/10.2139/ssrn.2812535

Jaime Bonnin Roca (Contact Author)

Eindhoven University of Technology (TUE) - Department of Industrial Engineering and Innovation Sciences ( email )

Den Dolech 2
Eindhoven
Netherlands

Parth Vaishnav

Carnegie Mellon University - Department of Engineering & Public Policy ( email )

Pittsburgh, PA 15213-3890
United States

M. Granger Morgan

Carnegie Mellon University - Department of Engineering and Public Policy ( email )

Baker Hall 129
5000 Forbes Avenue
Pittsburgh, PA 15213
United States

Joana Mendonça

Technical University of Lisbon (UTL) ( email )

R. Miguel Lupi, 20
Lisbon, 1200
Portugal

Erica Renee Fuchs

Department of Engineering and Public Policy, Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

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