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Abstract Regulatory agencies are increasingly pivotal in shaping innovation trajectories. This study examines how regulatory flexibility shapes innovation commercialization efficiency. Using a panel of 31 national jurisdictions (2012–2023), the study develops a Regulatory Flexibility Index (RFI) from regulatory documents and procedural data. A modified stochastic frontier analysis and panel estimations reveal that regulatory flexibility significantly boosts innovation efficiency, especially for high-novelty technologies and in contexts with strong regulatory expertise. However, this positive effect is undermined by high public risk sensitivity and weak institutional autonomy. The study advances a reproducible approach to measuring regulatory adaptability and clarifies its multi-level consequences for innovation systems. It also reframes regulators as co-producers of innovation legitimacy, methodologically validating a cross-national metric of regulatory adaptability, and offering practical policy strategies to strengthen innovation governance. Our findings demonstrate that adaptive regulation is a critical enabler of innovation, contingent on institutional capacity and public sentiment.
Suleman Bawa (Fri,) studied this question.