Regulating Business Innovation as Policy Disruption: From the Model T to Airbnb

53 Pages Posted: 14 Apr 2017 Last revised: 19 May 2017

Eric Biber

University of California, Berkeley - School of Law

Sarah E. Light

University of Pennsylvania, The Wharton School - Legal Studies & Business Ethics Department

J. B. Ruhl

Vanderbilt University - Law School

James E. Salzman

University of California, Santa Barbara - Donald Bren School of Environmental Science & Management; University of California, Los Angeles (UCLA) - School of Law

Date Written: April 12, 2017

Abstract

Many scholars have invoked the term “disruptive innovation” when addressing the platform (sharing) economy, with sweeping claims about the dramatic changes this development promises for law, regulation, and the economy. The challenges raised by the platform economy surely are important, but we argue that recent scholarship focusing on the immediacy and novelty of the platform economy has been ahistorical, and has therefore missed the bigger picture about how to regulate it. History is full of technological and management advances that fundamentally disrupted business models for a brief period of time. When business innovation upends a pre-existing business model in a regulated industry, the result can be a disjunction between the structure of the regulatory system governing incumbent firms and the firms disrupting the industry: a policy disruption. Policy disruption can result from conscious choices by entrepreneurs to exploit legal loopholes or to challenge regulatory protections for incumbents. But it can just as easily result from gaps in a regulatory regime or fundamentally new business models that solve problems legal regimes have been designed to address. This Article is the first to offer a comprehensive analytical framework of how business innovation can create policy disruption and how regulators should respond. We develop a three-step process that should guide regulators in responding to policy disruptions suggesting that, as a default, regulators should strive to be neutral as between incumbents and innovators. We conclude by offering specific policy instruments that regulators can use to draft laws more neutrally to avoid or limit such policy disruptions in the future.

Keywords: Business Innovation; Disruptive Innovation; Policy Disruption

Suggested Citation

Biber, Eric and Light, Sarah E. and Ruhl, J. B. and Salzman, James E., Regulating Business Innovation as Policy Disruption: From the Model T to Airbnb (April 12, 2017). Vanderbilt Law Review, Forthcoming; Vanderbilt Law Research Paper No. 17-24; UCLA School of Law, Public Law Research Paper No. 17-18. Available at SSRN: https://ssrn.com/abstract=2951919

Eric Biber

University of California, Berkeley - School of Law ( email )

215 Boalt Hall
Berkeley, CA 94720-7200
United States

Sarah E. Light

University of Pennsylvania, The Wharton School - Legal Studies & Business Ethics Department ( email )

3730 Walnut Street
Suite 600
Philadelphia, PA 19104-6365
United States

J. B. Ruhl (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

James E. Salzman

University of California, Santa Barbara - Donald Bren School of Environmental Science & Management ( email )

4670 Physical Sciences North
Santa Barbara, CA 93106-5131
United States

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States

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