NEW RESEARCH | Innovation in regulatory-heavy industries – strategies for success

Introducing new products and companies to a market is a challenge – especially in highly regulated industries such as gaming and life sciences. But how do you balance innovation with strict regulations?

Gaming and life science industries (e.g. medicine and biotechnology) are highly regulated as the products and services can pose risks to users. Companies that want to enter these environments have to deal with extensive regulations where safety and innovation must go hand in hand. Jackson Kinyanjui, a researcher at Halmstad University, has examined this process in his doctoral thesis.

Four routes to establishment

Research shows that adapting to the current regulatory framework is crucial for new companies and products to be accepted by customers and authorities. Legitimacy is not static – it must be constantly maintained through trust-building measures.

The study identifies four ways in which new products, businesses and industries emerge. Each path requires a unique strategy to balance innovation and compliance:

1. Benevolent emergence – New products or companies have limited impact and never achieve major success, which can lead to their rapid disappearance.
   
2. Overarching emergence – An institution or authority creates a regulatory framework for a new industry. Companies must follow the rules to gain legitimacy.
   
3. Radical emergence – Two new actors emerge simultaneously but from different directions. A new company may be supported by customers, while a new authority is supported by politicians. These forces can come into conflict, which can hamper the development of the sector.
   
4. Nominal emergence – In some cases, it is businesses, rather than governments, that set the rules and create order in a new industry. This is the opposite of superordinate emergence.

Strategies for success

Acceptance of new ideas and innovations requires well thought-out strategies. One of the most important is to listen to the market.

– Using feedback loops is crucial. Companies need to have a two-way communication where they both present their ideas and listen to customers’ reactions, says Jackson Kinyanjui.

Another strategy for success is to build on what is already known.

– When a company launches a new product, it may be wise to introduce it with elements that the target audience is already familiar with and then gradually add the innovative elements. The aim is to reduce the uncertainty that can arise from novelty and thereby make the transition from the known to the unknown smoother.

Finally, repetition and consistency are important factors in building trust.

– By acting consistently and repeating their messages and actions, companies can prove their legitimacy and gain trust, explains Kinyanjui.

Benefits for several societal actors

The study is relevant for both policy makers and business leaders.

– Policy makers can use the results to design regulatory frameworks that foster the development of new businesses and products. Through my research, business leaders can gain a deeper understanding of the challenges of growing in industries undergoing radical change, says Jackson Kinyanjui.

Contact jackson.wanjiku@hh.se

More about the thesis
Jackson Kinyanjui recently defended his doctoral thesis Competing for Legitimation at Halmstad University.