Policy and regulation can have a significant impact on companies in the tech sector, in terms of both their operations and their growth prospects. Keeping abreast of political and regulatory trends will help companies to spot potential threats or opportunities early on.
Where once policy makers would turn to Silicon Valley to bring innovative solutions to long term economic and social problems, they are now more likely to see those same companies as the cause of significant new economic and social problems.
Playing catch up
This does not mean that the public and policy makers have become ‘anti-technology’, but they are increasingly sceptical about claims of revolutionary change and the value of disruptive innovation. Policy makers are aware that it is impossible for regulation to keep up with innovation in an open global economy and are therefore adopting either increasingly interventionist approaches or new protectionist policies to try to minimise economic and social disruption.
The ubiquity of multinational ‘big tech’ companies across almost all sectors of the economy means that it has never been more difficult to successfully breakthrough in the tech sector – this is true in terms of policy and regulation as well as business growth.
The fact is, any company in the tech sector offering innovative products and solutions are bound to come up against regulatory and policy issues in their attempts to develop ways of meeting ever-increasing consumer demand. This is particularly the case where innovations are disrupting an existing regulated industry, as Uber have done for taxis and Airbnb have done for hotels.
Opportunities as well as threats
At the same time, we are living through a time of ever-accelerating change in all sectors of the economy and policy makers are keen to find ways in which their country can benefit from these changes in a way that delivers a sustainable social and economic benefit.
In Europe, in particular, this is leading to many new opportunities for the tech sector to address long-term and systemic social policy problems such as sustainable urban transport, care for the elderly, and the need for energy efficiency across the economy. In the UK, the government has identified both autonomous vehicles and artificial intelligence as sectors in which they would like to see the UK take a global lead. To this end they are changing the law, providing public funding, and offering other support to companies in those sectors.
Two very different worlds
There are some inherent differences between innovation and policy making that challenge the prospect of the two working together harmoniously. Innovations in the tech sector are fast and agile. By contrast, policy making is often long and complex.
Broadly speaking, the policy and regulatory environment is supportive of innovation. But it is not a case of ‘the fewer rules and regulations the better’. The focus instead is on having the right standards in place to allow innovation to thrive. The Porter Hypothesis, put forward by the economist Michael Porter in 1995, states that well-designed regulations encourage competitiveness and innovation.
What does it mean for the tech sector?
Since policy and regulation can have such a big impact on a company's operations and growth prospects, it is in the best interest of those in the tech sector to keep an ear to the ground on political and regulatory trends so they can spot potential threats or opportunities early on.
Many of the most successful tech companies have developed strategies for engagement with policy makers and regulators to create relationships where government, regulators and industry can work together to achieve better outcomes. This does not mean you need to spend the amount of time and money that Google, Amazon and Apple spend lobbying (they are now amongst the biggest spenders in US politics, and increasingly in the EU). However, by approaching engagement with policy makers as a dialogue, you can build trust which will help you influence emerging political and regulatory changes.
Topics: Innovation policy, Big Tech, David Abrahams
Written by David Abrahams
David’s is an experienced public affairs practitioner with a background in competition regulation and a particular focus on technology, mobility, telecoms and internet infrastructure. He leads Inline's mobility practice.
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