Internet regulations have a wide variety of impacts, from promoting or hindering innovation to creating new forms of privacy or free expression. Many of these effects are indirect and hard to predict. However, there is growing recognition that the specifics of internet regulation matter, with each country having to blaze its own path. This raises the question whether those countries considering regulating the Internet can learn from the lessons of others or must each reinvent the wheel.
A growing drumbeat in the United States and around the world calls for more regulation of internet companies. The most commonly cited regulation is to make internet platforms abide by 1930s telecom law—Title II—and require them to treat all content equally. This is a radical change in how these companies operate, and its advocates have often argued that it is necessary to address concerns about online harassment and manipulation of the data that they collect on their users.
The problem is that this regulation threatens internet freedom and could actually harm innovation. It would lock in large incumbents and make it even harder for small companies to compete with them. It would also eliminate the Federal Trade Commission’s authority over these firms and thereby reduce regulatory oversight of these innovative platforms.
To study the implications of this regulation, we use a novel approach to investigate its impact on innovation performance. Informed by complexity theory, we develop a model that identifies the set of conditions required for high innovation performance. We then test the model against real-world data and find that internet regulations in various countries are associated with differing levels of innovation.