How do state internet regulations impact innovation? A cross-country configural narrative

Innovation and the state's commitment to innovation are key factors driving a country's economic growth and social well-being. Internet-based systems can foster high levels of innovation. However, as the Internet is a double-edged sword, it is essential to introduce regulations to mitigate potential detrimental effects. In most cases, the multifaceted impact of internet regulations on innovation performance seems unexplored. Based on Complexity Theory and configurational analysis, this paper examines the role of content coverage in regulations, the government's ability to regulate, and the approach followed by the government to control internet regulations on innovation performance. Publicly archived cross-sectional data from 130 countries for the years 2021 and 2022 were used for the Fuzzy-set Qualitative Comparative Analysis. The findings suggest that regulations to safeguard free speech, privacy laws, and the government's ability to enforce restrictions significantly contribute to high innovation performance, with mixed results for low innovation. Furthermore, the impact of internet regulations on online creativity, which is a key aspect of innovation, is investigated to identify similar findings. The research implications of the findings will be to extend theoretical discourse on innovation and regulations, while the findings will be valuable for policymakers in developing an innovation ecosystem in low-innovation countries. • Fuzzy-set Qualitative Comparative Analysis (fsQCA) was used to analyse publicly available data from 130 countries. • The study explores legal frameworks, regulatory capacity, and governmental approaches to control internet content. • Internet rules on speech, privacy, and enforcement capacity strongly influence a country's level of innovation performance. • Similar results are shown for the relationship between internet regulations and online creativity.