Analysing the Impact of Regulation on Disruptive Innovations: The Case of Wireless Technology

The paper analyses the role of regulation in the suppression of disruptive innovations and shows that this process might be explained by the dependance on the path of joint evolution of regulation and the mainstream technology. Industrial policy in highly regulated industries such as wireless telecommunications is able to support evolution of established technologies and adjust itself to sustaining innovations, while regulatory disconnection impedes disruptive technologies, and the market plays a quite secondary role in this process. We observe more innovations in those parts of telecommunications where regulator is less active, but the core, the physical layer, of the industry is changing in sustaining way of development of the technology. The paper argues that the problem of impediment to disruptive innovations could be alleviated if the crucial resources of the industry were accessible for a number of potential innovators and newcomers. The openness makes easier the appearance of disruptive technologies, and regulation must facilitate it in order to promote opportunities for creative destruction.