Technological Innovation, Market Competition, and Regulatory Reform in Telecommunications

Abstract

In addition to the market and government, technology is believed as the “third hand” in the telecommunications industry, and the “third hand” has played a critical role in the evolution of the telecommunications industry. Thus, it is instructive and meaningful to study the relationship between technological innovation, market competition and government regulation in this industry. Based on this, using a panel dataset for 122 countries over the period of 2010–2015, this study empirically examines the impacts of market competition, independent regulatory agency, and privatization on technological innovation in the telecom industry. In line with some previous literature, the results show that the relationship between technological innovation and market competition in telecommunications is an inverted U-shape. Moreover, this study finds that privatization of telecom operators alone provides few benefits to the effect of innovation, and it is particularly important to build up an independent regulatory body in the privatized telecom broadband market in terms of technological innovation. We also provide several policy implications regarding these findings.