News Item
"Can North America" featured Bruce Bachenheimer, Clinical Professor of Management and Executive Director of the Entrepreneurship Lab in "North America’s most powerful cities"
Regulations
Powerful cities don’t regulate to prevent progress, they regulate to protect investors, for example, and to provide for a more livable environment that attracts talent.
The top-ranking cities also offer a sense of trust because there’s a rule of law and low political risk. Having a well-developed commercial legal system works in favor of companies that want to operate in these cities.
While regulations can create high expenses for companies, those that go through tremendous regulatory hurdles for the SEC, auditors or other regulatory bodies have higher valuations, because the regulations work to prevent fraud and accurately identify risk.
“What’s a problem is regulations that don’t make sense, but the idea that regulation is hurting business is misunderstood at best,” said Bruce Bachenheimer, Clinical Professor of Management and Executive Director of the Entrepreneurship Lab at Pace University. “Financial regulation will cost companies money in compliance, but the value of their stock is exponentially higher because they comply with that regulation.”
Regulations do serve to protect businesses and their operations, but they can also prevent innovation. Lobbying for restrictions to maintain the status quo and protect businesses might work for a short period, but then the city will eventually falter, said Bruce.
The Austrian economist Joseph Schumpeter coined the phrase creative disruption to describe the idea that some things needed to be destroyed, because, in spite of any pain from that change, it freed resources and energy that could be reallocated and used for disruption.
Companies can lobby for regulation that prevents a new way of distribution or a more innovative product in the market, for example, but allowing for the creative process to continue is what enables progress in the long run.
