The Role of Flexibility and Complexity in Response to Regulatory Change: A Case Study of Innovation in a Major Danish Financial Institution

Eric Bentzen, Åke Freij, Claus J. Varnes*

*Corresponding author for this work

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The link between regulations and innovation is puzzling. Some studies point to higher innovation performance as an effect of regulation, whereas other researchers disagree. A literature review shows empirical inquiries into various industries, with the financial sector attracting significant attention. The review also points to a company’s responses’ flexibility and complexity as variables mediating the relationship between regulation and innovation performance. These variables remain underexplored as empirical objects of analysis on a company level in the financial sector. By applying a case study research strategy, 100 launched financial service innovations’ performance is compared with qualitative data assessing flexibility and complexity in the project work, leading to the launch of these products into the marketplace by a major Danish financial company. Finally, these data are quantitatively tested with a multinomial logit model. The results contribute to the differing views on how regulations influence innovation by showing links between high flexibility and low complexity in firm response for improved innovation performance. Increased complexity, in turn, impedes performance. Hence, specific innovation efforts from management are critical for striking the right balance between flexibility and complexity to achieve success in connection with regulatory changes.
Original languageEnglish
JournalThe International Entrepreneurship and Management Journal
Issue number4
Pages (from-to)229-239
Number of pages11
Publication statusPublished - Nov 2021

Bibliographical note

Published online: January 25, 2021.


  • Complexity
  • Flexibility
  • Innovation
  • Innovation management
  • Regulation

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