Bridging the micro–meso gap in place-based regulatory sandboxes: a mixed-methods analysis of Korea’s Regulation-Free Special Zones

As urban regions become testbeds for technological innovation, regulatory sandboxes have emerged as critical place-based policy instruments. This study evaluates Korea’s Regulation-Free Special Zones (RFSZs), introduced under a statute that entered into force in April 2019, with the first zones designated in July 2019, to accelerate innovation in non-metropolitan cities through spatially targeted deregulation. We ask why successful firm-level demonstrations within these zones do not consistently translate into meso-level institutional change, defined here as the conversion of local demonstrations into durable regulatory amendments and nationally usable policy templates. We employ a sequential explanatory mixed-methods design. Phase 1 uses Propensity Score Matching with two-way fixed-effects estimation on a 2017–2023 panel of 220 RFSZ firms and 440 matched controls. Phase 2 applies Actor-Centred Institutionalisation to 23 semi-structured interviews with central regulators, local administrators, and firm representatives. Participation is associated with approximately 24.5% higher sales and 58% more patent applications per year in the zone, though we interpret these patterns cautiously given staggered timing and possible selection on unobservables. Qualitative analysis reveals a meso-level translation gap: administrative records indicate that only about 15% of demonstration projects had resulted in permanent national regulatory changes by 2023, with average institutionalisation lags exceeding two years. Three recurring barriers emerge: scale mismatch between local promoters and risk-averse central ministries; institutional fragmentation across parallel regulatory mechanisms and sandbox frameworks operated by six separate ministries; and absent bridging mechanisms. We frame these findings using an integrative Evidence–Institutionalisation–Diffusion sequence, concluding that in multi-level, multi-ministry sandbox systems, deliberate institutional design – not spatial designation alone – determines whether localised evidence travels beyond the zone.