Applying Regulation for Implementing Innovation Policy

Many scholars emphasis on regulation as a one of innovation policy instrument, recently. The variety of regulation and increasing cost of financial innovation policy instruments justify the design and usage of regulation, however, direction and stringency of its effect is a crucial matter for policymakers. It is a necessity to understand why/how/what regulation take effects on innovation. Hence, this paper aims to clarify this effect mechanism from government intervention, economic theories, value chain, and cost compliance perspectives. Also, traditional regulatory frameworks are criticized by the changing environment of firms and industries that are affected by increasing competition and, consequently, emerging disruptive innovation. The dynamic regulation frameworks are the developing response to these criticisms that I describe their important features. Finally, this research tries to provide evidence of the effect of regulations on innovation by presenting how the rules and regulations apply to pharmaceutical firms in Iran.