When Should Regulatory Adaptation Be Centralized vs Decentralized? Lessons from COVID on Technological Complexity, Local Capabilities, and Speed

Abstract

This paper unpacks how centralization (vs. decentralization) of the regulatory process may affect the speed and efficacy with which a nation or region can expand its internal innovation and production capacity when access of technologically complex safety critical products suddenly become limited. We focus on European regulation of new entrants into mechanical ventilators and vaccines during the recent COVID-19 pandemic. We draw insights from 77 semi-structured interviews with experts from industry, healthcare workers, regulators, non-profit organizations, and research centers. Our results show that centralized adaptations to established market entry regulations resulted in equitable access of emerging innovations to all EU Member-States. In contrast, decentralized adaptations benefitted only those Member-States that already had strong domestic industries and dynamic regulatory capabilities. We conclude by proposing new theory on when centralized versus decentralized regulatory approaches are best positioned to regulate market entry in safety-critical products, and how this may differ for technologically simple versus complex products.

Keywords: Regulatory adaptations, Firm entry, Critical products, Public policy, Technological complexity, Cross-institutional collaboration