Abstract
Relations between innovation and regulation are all but fluid and simple. When innovation, beyond just developing new techniques, means redefining the very framework for implementing and operating technologies, it often means breaking the rules, challenging them. In the digital economy, the way it overturns the regulation and rule setting system is particularly radical. Innovation is key to create competitive advantage in a highly dynamic sector such as information and communications technologies. Firms invest heavily in productive resources and take steps to protect their competitive advantage. Productive resources are either network and connection infrastructure or consumer control which is rarely seen as such. It could be consumer’s attention or visits which requires massive investments in content, for example. It does include intermediation platform like search engine, programs, knowledge, entertainment and other immaterial products of the digital age. There is a need to rethink regulation on the basis of innovation and mobilization of these productive resources. The digital economy calls for a more holistic consideration of the link between innovation and mobilization of value on the one hand, and regulation on the other.
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Notes
- 1.
Even though a laissez-faire approach involving lack of regulation is often considered a method for management.
- 2.
See, for example, Schumpeter who has already discussed the notion of destructive creation.
- 3.
This tension was particularly noticeable in France upon the adoption of the recent law on digital rights.
- 4.
In a discussion on innovation and competition, Joseph Stiglitz offers broader consideration of the issue of the vitality of competition and criticisms of traditional antitrust policies (Stiglitz 2002).
- 5.
This holds true, for example, in the “end-to-end” principle, which aims to simplify the infrastructure by coming up with “dumb” networks and “intelligent” applications, thus setting up an implicit hierarchy between upper and lower layers.
- 6.
Philips, Sony.
- 7.
This held true for Sony, in particular, after it failed to impose the use of Betamax over JVC’s VHS alternative.
- 8.
The audience becomes a commodity and capital in itself, as non-profitable companies, or companies with uncertain future profits, have been able to sell themselves very highly on this basis (as seen with Skype).
- 9.
The recent interest in the theory of two-sided markets is a good illustration of this: see Bourreau and Sonnac (2006).
- 10.
10 Why install FTTH if there is no market for video services? In such a case, ADSL largely suffices.
- 11.
For links between unbundling, access conditions and innovation, see Baranes and Bourreau (2002).
- 12.
In the style of Sun Tsu or Laozi rather than Clausewitz, to offer a traditional contrast.
- 13.
An entire strand of the literature, known as the “resource-based view,” has grown on the basis of Wernerfelt’s work. Wernerfelt postulates that the competitive advantages of firms are based on their ability to mobilize the resources at their disposal and deploy them in a firm-specific manner (Wernerfelt 1984).
- 14.
Following Teece et al. (1997), these questions have continued to be debated (see e.g. Spannos and Lioukas 2001).
- 15.
The concept of control used here encompasses control over access to these resources, from their use to their appropriation.
- 16.
The same trend can be observed in the case of copyright.
- 17.
It was first expressed in the United States in 1912, in a Supreme Court decision concerning railway networks.
- 18.
At the beginning of the 1990s the European Commission used for the first time this theory about harbor facilities in its decision Sealink II of December 21st, 1992 (Décis. Comm. IT, in December 21st, 1992, Sea Containers c. Stean Sealink, Europe in March, 1994, n 115, the Ob. L.I.).
- 19.
This is no doubt what is at stake in the current debate regarding the “portability” of cell phone numbers and, more generally, of identifiers.
- 20.
See for example Bronner vs Mediaprint/Austria.
- 21.
See the comments of Joseph Stiglitz in Competition and Competitiveness in a New Economy (Stiglitz 2002).
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Acknowledgments
This paper had been developed with the support of the Chair Innovation & Regulation of Digital Services, jointly created in 2007 by Orange, Ecole Polytechnique and TELECOM ParisTech.
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Benghozi, PJ., Gille, L., Vallée, A. (2009). Innovation and Regulation in the Digital Age: A Call for New Perspectives. In: Curwen, P., Haucap, J., Preissl, B. (eds) Telecommunication Markets. Contributions to Economics. Physica, Heidelberg. https://doi.org/10.1007/978-3-7908-2082-9_28
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