Regulatory delay and the timing of product innovation

This paper examines how regulatory delay affects innovation by a regulated firm. When product introduction costs fall over time, an extra day of regulatory delay increases time to introduction by more than a day. When the uncertainty of regulatory delay increases, a risk neutral firm responds by moving up the product introduction. The model places testable restrictions on the empirical relationship between introduction delay and regulatory delay, and is consistent with data gathered from a large U.S. telecommunications provider. (c) 2006 Elsevier B.V. All rights reserved.