Regulatory Capacity: Governing in an Era of Rapid Technological Change

Introduction

A truism of regulation is that it stifles innovation. Though a sizable literature points out that markets can falter in the absence of regulation (e.g. North 1990; Rodrik 1998; Vogel 2018; Hughes 2025), there is a tendency to assume that public sector organizations are not sites of innovation. At the same time, regulators must keep pace with technological change if they expect to be able to carry out their statutory responsibilities. Drawing from the absorptive capacity literature, which identifies multiple strategies that are associated with maintaining competitiveness in fields characterized by rapidly emerging technologies, this study began by asking whether any of the strategies found in the private sector are used in public organizations.

To address this question, this study compares two regulatory regimes confronted with rapidly emerging technologies—gene therapies, including CRISPR/Cas-9 gene editing, and connected and autonomous vehicle technologies (CAV). In both cases, novel technologies are being built upon pathbreaking and potentially transformative innovations but with significant known and unknown risks. While regulators have, in the past, developed the technical frameworks that help separate safe from unsafe technologies (e.g., Carpenter 2010), the current pace of technological change and declining support for public sector expertise may mean that early 20th Century examples are out of date.

Our findings indicate that public sector actors pursue multiple strategies with the goal of producing regulatory decisions supported by relevant, and even ample, expertise. While some of what we observe overlaps with strategies used in the private sector, public sector organizations stand out for treating absorptive capacity as a public good. This includes what we call “convening” and “seeding” and involves the use of organizational resources in an effort to increase extra-organizational assimilation, translation, and exploitation. These findings suggest that public sector organizations can expand technical competence and even play a supportive role in the context of rapidly evolving technologies.

The paper begins with a brief background of the technologies and their respective regulators. Next, we review the literature that informed our expectations about how public sector agencies might build and maintain expertise when faced with rapidly emerging technologies, noting recent calls for empirical investigation of this question. Following a description of our methodological approach, we present our empirical findings and discuss their implications as well as limitations of our study.

Background

In the two cases examined here, regulators must carry out their statutory roles in response to novel technologies. The two cases were chosen because of the expectation that the technologies emerging at the time might require regulators to develop novel expertise. However, the regulatory regimes in question are quite different in the two cases. Gene therapies are centrally regulated by the Food and Drug Administration (FDA), whereas connected and autonomous vehicle (CAV) technologies are a suite of vehicle and physical/cloud infrastructure technologies that are regulated across sectors (e.g., vehicle, roadway, communication spectrum, etc.) across multiple federal, state and local actors and even international standard setting organizations (see Appendix A for more detail about the CAV case).

The FDA gained the statutory authority to approve medical drugs and devices before market entry with the passage of the Kefauver-Harris Amendments in 1962. This gatekeeping role requires the FDA to evaluate innovative applications in medical therapeutics. While the FDA has decades of experience with small-molecule drugs, the rise of biologics, particularly those characterized by rapid innovation, allows for an examination of how the agency manages this role when new technological modalities enter the drug pipeline. We specifically explore the experience of regulators and regulated entities during the Investigational New Drug (IND) application process and subsequent clinical trials—the regulatory hurdle innovators must clear to begin experimental treatments. 

Therapies designed to modify the human genome, such as CRISPR-Cas gene editing, present significant potential for addressing human disease but also pose substantial risks of unpredictable adverse effects (Ngo et al. 2026). Millions of individuals globally are afflicted by diseases of genetic origin, for which effective treatments are currently deficient or unavailable. Innovations utilizing gene therapies have begun to address some of these previously unmet medical needs. However, assessing the safety and efficacy of these novel therapies introduces complex challenges to the FDA. For instance, the curative effect of a gene therapy may diminish over time, or initially unforeseen adverse effects may manifest years following treatment. Concurrently, careful scrutiny and rigorous scientific evaluation of these innovative therapies are critical, given the high likelihood that individuals facing debilitating or fatal gene-based diseases will be desperate to seek access to these new treatments as their sole prospect for a cure.

Connected and autonomous vehicle technologies rose in the public’s consciousness when improvements in remote sensing and internet connectivity increased the potential not only for driver-assist technologies, but led private sector companies to consider the potential of totally autonomous driving (Alvarez León and Aoyama 2022). While the public sector had been involved in CAV R&D for decades, particularly in aviation and defense (Billings 1997; Smith 2019), the sudden competition among traditional and new entrants in private sector vehicle technological development created new pressures on transportation regulators to be ready to respond (Carp 2018; Claybrook and Kildare 2018; Hemphill 2020).

In comparison with ready fit of CRISPR and other gene therapies under FDA’s existing investigational new drugs (IND) pathway, CAV technologies posed challenges for the transportation regulatory regime. Specifically, the existing regulatory structure treated drivers, on the one hand, and roads, infrastructure and vehicles, on the other, as separate. At the federal level, NHTSA operates within the USDOT to set and assess vehicle safety standards while the Federal Motor Carrier Safety Administration (FMCSA) oversees the safety of commercial motor vehicles. State DMVs, in contrast, license drivers and add regulations (e.g., emissions, safety inspections) to vehicles.  Separately, state highway patrols and local traffic enforcement oversee drivers’ compliance with driving laws. USDOT and state DOTs cooperatively maintain roads and infrastructure such as signs, bridges, and signals.

This project was made possible through the support of Grant 63641 from the John Templeton Foundation. The opinions expressed in this publication are those of the author(s) and do not necessarily reflect the views of the John Templeton Foundation. For more information, visit The Next Frontier: Rethinking Regulation in an Era of Rapid Innovation.