Minimum quality standard regulation and entrepreneurial innovation

Bryan C. McCannon (Department of Economics, West Virginia University, Morgantown, West Virginia, USA)

Journal of Entrepreneurship and Public Policy

ISSN: 2045-2101

Publication date: 12 November 2018

Abstract

Purpose

The purpose of this paper is to explore the impact that minimum quality standards have on product quality when entrepreneurial innovation is considered.

Design/methodology/approach

The author develops a game-theoretic model. It is a standard vertical product differentiation model, but incorporates a minimum quality standard and uncertain entrepreneurial innovation.

Findings

While the minimum quality standard increases the expected quality of the low-quality product, under reasonable circumstances the expected quality of the high-quality good decreases. Thus, average quality can decrease with regulation intended to increase product quality.

Research limitations/implications

Past research on minimum quality standards does not consider its impact on entrepreneurial effort when their innovation investments lead to uncertain outcomes.

Practical implications

Minimum quality standard regulation can have counterproductive impacts if the impact on entrepreneurs is not considered. The regulation can disincentivize entrepreneurs leading to lower quality products.

Social implications

Regulation can be welfare reducing.

Originality/value

This paper is the first to incorporate entrepreneurial innovation into a product quality model to explore the impact of minimum quality standard regulation.

Keywords

Citation

Bryan C. McCannon (2018) "Minimum quality standard regulation and entrepreneurial innovation", Journal of Entrepreneurship and Public Policy, Vol. ahead-of-print No. ahead-of-print

Download as .RIS

DOI

: https://doi.org/10.1108/JEPP-D-18-00020

Publisher

:

Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

Please note you might not have access to this content

You may be able to access this content by login via Shibboleth, Open Athens or with your Emerald account.
If you would like to contact us about accessing this content, click the button and fill out the form.