[2021-04] Exploring how interest groups affect regulation and innovation based on the two-level games: The case of regulatory sandboxes in Korea
Moon Soul Graduate School of Future Strategy, KAIST
ABSTRACT The rapid development of science and technology creates sharp conflicts over newly emerged technologies. Policymakers strive to avoid potential harms and risks while promoting the development of new technologies. In this process, regulatory delays are often witnessed in which laws and systems lag behind in technological development. This study explores how interest groups affect government delays in regulation, considering the influence of interest groups as a fundamental cause of conflicts related to new technology development. As an analytical frame, we adopted Robert Putnam (1988)'s two-level game model, which analyzes negotiations between countries in international politics. This model is adopted because inter- ministerial negotiations for regulatory policy produce a similar structure in which countries consider domestic interest groups and other foreign governments in cross-country negotiations. As a case study, we used Korea's regulatory sandbox system. The regulatory sandbox is designed to preemptively test new technology that existing laws and systems did not expect in the real market and improve regulatory measures based on the results. This research placed emphasis on shedding light on the mechanism of how interest groups influence inter-ministerial regulatory policy negotiations within governments, an area previously unexplored. Through this, the characteristics of inter-ministerial new technology in negotiations have been conceptualized into ten new propositions. Using these propositions, it was confirmed that negotiation outcomes were dictated by four typologies: ‘mutual cooperation’, ‘active acceptance for new technology’, ‘passive acceptance for new technology’, and ‘adversarial opposition type’. Based on type or characteristic of new technologies, solutions for settling conflicts were proposed as well. Moreover, this study is significant in that the research scope of regulatory sandboxes have been expanded from just being limited to Fintech to new technology fields in general including ICT and industrial fields, etc. In particular, implementation of inter-ministerial competition for negotiation balance and related implications were provided for a method for operating regulatory sandbox to regulatory bodies of each country.
Keywords: Technological innovation, Government regulation, Regulatory sandbox, Two-level games, interest group