Innovation and public space: The developmental possibilities of regulation in the global south

Important product and process innovations are often developed in “public spaces” that promote collaboration and provide shelter from market competition. Given that most collaborative spaces are costly to establish, the possible implications are bleak for economically strapped developing countries. This paper highlights a less conspicuous – if not unknown – source of collaborative space: the regulatory process. Regulators can induce innovation by promoting collaboration across organizational, sectoral, and disciplinary boundaries in the interest of regulatory compliance. This paper documents the innovative consequences of efforts to regulate the use of lead‐based glazes in the Mexican ceramics industry and reconsiders several recent studies of upgrading in other countries that appear to have been driven, at least in part, by the regulatory process. Drawing on these cases, this paper makes four primary points: (i) that innovation in regulatory spaces is more common than previously acknowledged and is producing meaningful improvements in product quality and working conditions in developing economies; (ii) that promoting innovation in these regulatory spaces is an important developmental tool for countries that are “regulation‐takers” and have many low‐tech sectors; (iii) that this dynamic extends current conceptions of regulatory discretion, as well as development literature on state‐society synergies; and (iv) that establishing collaborative public spaces as a common conceptual framework is a critical step toward understanding the consequences of social regulation on upgrading.