Examining the complex relationship between innovation and regulation through a survey of wastewater utility managers.

Despite pressures to increase performance and decrease costs, innovation has been slow to emerge in the municipal wastewater sector. The relationship between regulation and innovation in this sector is a particularly interesting aspect of this conundrum, given the degree to which public utility decision-making is influenced by regulation. Using a national survey, this paper examines US wastewater utility managers' perceptions of how regulation influences the adoption of new technologies. Recognizing that the relationship between innovation and regulation is complex, we develop the concept of regulation as multifaceted and examine three interrelated aspects of regulation: (1) regulatory requirements, (2) regulators and relationships, and (3) the broader regulatory environment. Specifically, we seek to understand whether and in what ways wastewater utility managers perceive these aspects of regulation as hindering or encouraging the adoption of new technologies. We find that, although stringent effluent limitations are perceived to be a moderate barrier to innovation, most survey respondents did not identify weakening them as a way to encourage innovation. Instead, respondents generally identified factors related to regulatory relationships and factors related to the broader regulatory environment as barriers to innovation, and indicated that addressing these aspects of regulation would encourage innovation. We conclude that loosening or tightening regulatory requirements is not the most effective way to promote innovation in the municipal wastewater sector. Rather, those parties with an interest in innovation can focus on helping utilities and regulators build relationships and better navigate the processes that influence decisions about new technologies.