Regulation as the Mother of Innovation: The Case of So2 Control

Abstract

This paper explores the relationship between government actions and innovation in an environmental control technology - sulfur dioxide (SO2) control technologies for power plants - through the use of complementary research methods. Its findings include the importance of regulation and the anticipation of regulation in stimulating invention; the greater role of regulation, as opposed to public R&D expenditures, in inducing invention; the importance of regulatory stringency in determining technical pathways and stimulating collaboration; and the importance of regulatory-driven technological diffusion in contributing to operating experience and post-adoption innovation in cost and performance. A number of policy implications are drawn from this work.