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Regulation as the Mother of Innovation: The Case of SO2 Control*


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    Support for this research was provided by grants from the National Science Foundation to the Carnegie Mellon University Center for Integrated Study of the Human Dimensions of Global Change (Grant No. SBR-9521914), and from the Office of Biological and Environmental Research, U.S. Department of Energy (Grant No. DE-FG02-00ER63037). The authors alone, however, are responsible for the content of this paper.

Address correspondence to Margaret R. Taylor, Goldman School of Public Policy, University of California Berkeley, 2607 Hearst Avenue, Berkeley, CA 94720-7320, USA; telephone: (510) 642-1048; e-mail:


This paper explores the relationship between government actions and innovation in an environmental control technology—sulfur dioxide (SO2) control technologies for power plants—through the use of complementary research methods. Its findings include the importance of regulation and the anticipation of regulation in stimulating invention; the greater role of regulation, as opposed to public R&D expenditures, in inducing invention; the importance of regulatory stringency in determining technical pathways and stimulating collaboration; and the importance of regulatory-driven technological diffusion in contributing to operating experience and post-adoption innovation in cost and performance. A number of policy implications are drawn from this work.