Functions of innovation systems as a framework to understand sustainable technological change: Empirical evidence for earlier claims

Understanding the emergence of innovation systems is recently put central in research analysing the process of technological change. Especially the key activities that are important for the build up of an innovation system receive much attention. These are labelled ‘functions of innovation systems’. This paper builds on five empirical studies, related to renewable energy technologies, to test whether the functions of innovation systems framework is a valid framework to analyse processes of technological change. We test the claim that a specific set of functions is suitable. We also test the claim made in previous publications that the interactions between system functions accelerate innovation system emergence and growth. Both claims are confirmed.     

Modelling the faddish, fashionable and efficient diffusion of agricultural technologies: A case study of the diffusion of wool testing technology in Australia

This study investigates the nature of innovation diffusion in an agricultural context. The dominant agricultural diffusion models assume that an economically rational choice is made to adopt or reject agricultural technologies. However, recent studies of agricultural innovation highlight the ‘irrational’ and potentially ‘inefficient’ nature of the diffusion in this context. To investigate how and why agricultural technologies are adopted or rejected, we examine the diffusion of wool testing technologies in the Australian wool industry using the Bass diffusion model and Abrahamson's diffusion and rejection typology. The results show that diffusion of agricultural innovation is not simply an efficient choice made to close observable performance gaps. The findings suggest that the adoption of inefficient innovations and the rejection of efficient innovations can be driven by an adopter's social context, powerful external influences and imitation within an adopter group and that these drivers change over time, suggesting an evolutionary social process underlies the diffusion of agricultural technologies.     

Analysis of barriers in the transition toward sustainable mobility in the Netherlands

The transition toward a sustainable transportation system in the Netherlands takes place in the context of the Dutch “Transition management policy framework”. We study four technological routes that the “Platform Sustainable Mobility” has selected for this goal: (1) hybridization of vehicles, (2) liquid biofuels, (3) natural gas as a transportation fuel and (4) hydrogen as a transportation fuel. These technological routes all envision large-scale changes in vehicle propulsion technology and fuel infrastructure. Furthermore, they compete for the scarce resources available to invest in new (fuel) infrastructures, which implicates that these ‘transition paths’ are also interdependent at the level of the mobility system. The main outcome of the analysis is the identification of barriers that are currently blocking the transition toward sustainable mobility. Barriers are classified as being related to (1) technology and vehicle development, (2) the availability of (fuel) infrastructures, and (3) elements of the institutional infrastructure. The transition management framework currently misses guidelines for coping with (competing) technologies that each require large infrastructural investments. We further argue that avoiding undesired lock-ins and creating a beneficial institutional context for sustainable mobility cannot be pursued at the transition path level. Therefore, we recommend that a more systemic approach should be taken to the transition to sustainable mobility, in which the interdependencies between the transition paths are critically assessed and in which the possibilities to legitimize sustainable mobility as a whole should be used.     

Arenas of expectations for hydrogen technologies

Technological development is often described as an evolutionary process of variation, selection and retention. Different technologies are seen as variations, while the market and other institutions operate as a selection environment. It is less understood, however, how variation and selection relate in the case of emerging technologies. In this paper we introduce the concept of arenas of expectations to examine the relationship between variation and selection processes. Expectations are of particular interest in a pre-market phase of innovation, when performance, cost and other market criteria are less articulated and not stable. In arenas of expectations ‘enactors’ of particular technological variations voice and maintain expectations, while ‘selectors’ will compare and assess the competing claims. We analyse the expectations work of both parties in a case study on metal hydrides for the on-board storage of hydrogen for automotive applications. The paper concludes with a framework of ‘arenas of expectations’ as the linchpin between the processes of variation and selection of emerging technologies.     

Patterns of expectations for emerging sustainable technologies

Innovation is characterized by uncertainties, high risks, large investments and late returns on investment which make it a complex process. This is particularly true for sustainable innovation where market forces alone cannot be relied upon to realize the desired transitions. Insight in the dynamics of such innovation processes is necessary in order to influence technological change toward a more sustainable direction. However, few instruments and indicators are available to assess the performance of emerging technological innovation systems. In this phase competition often takes place based on expectations rather than on technological performance. This paper therefore focuses on the expectation patterns of technological innovation systems in the exploratory phase through the analysis of the expectation dynamics of three emerging technologies in the field of sustainable mobility within the Netherlands: biofuels, hydrogen as a transport fuel and natural gas as a transport fuel. These technologies do not only compete with the current fossil-fuel based system but also with each other. We have collected over 5000 expectation events regarding these technologies for the period 2000–2008 and discuss the insights generated by the comparison of the observed expectation dynamics to theoretical patterns.     

Promise and shortcomings of a green turn in recent policy responses to the “double crisis”

The paper analyses six international-scale responses to the financial and climate change ‘double crisis’ in order to: review how they define problems and solutions, analyse what underpins the policy choices revealed in these responses (the ‘green turn’), reflect on the implications of the proposed solutions in terms of sustainability and global environmental justice, and to suggest three elements for a paradigm shift towards an ‘alternative’ turn embedded in ecological economics theory. The analysis reveals that responses by leading international organisations continue to appeal to the precepts of neoclassical economy. We argue that from an ecological economics perspective, policy responses under the various labels of green economy, green growth, sustainable growth, green new deal, fall well short of what is needed to fight the environmental crisis and rising inequality across and within countries. The idea of justice and equity that underpins the mainstream approach seems inadequate in terms of sustaining our environmental base and global environmental justice. Based on this critical review, we propose an ‘alternative turn’, centred on three elements of a paradigm shift leading to a new economy where the environmental base and global environmental justice are at the centre of the discourse.     

Exploring sustainability transitions in the electricity sector with socio-technical pathways

This paper analyses sustainability transitions in the electricity system, using recent theories on socio-technical pathways. The paper describes three possible transition pathways and indicates the implications for (grid) infrastructures. The ‘transformation pathway’ is characterised by a further hybridization of the infrastructure; in the ‘reconfiguration pathway’, internationalisation and scale increase in renewable generation lead to the emergence of a ‘Supergrid’. The ‘de-alignment and re-alignment pathway’ is dominated by distributed generation and a focus on more local infrastructures. We suggest that this pathway, which involves a major restructuring of the electricity system, is less likely than the other two. The de-alignment and re-alignment pathway is therefore more dependent on external developments and/or strong policy interventions. All pathways, however, require major investments in infrastructure and innovative technologies.     

Is small really beautiful? A review of the concept of niches in innovation

This article reviews the concept of innovation niches through three categories: strategic niche management (SNM), specialised markets and niches formed as a technology declines. In the literature, innovation niches generate interest from both innovation and marketing perspectives. This review focuses predominately on the former from which the niche types have been adopted and analysed. Mostly, contributions since 1980 have been included, representing the period of academic interest in innovative small firms, while both temporal and locational filters were applied to the study. It is noted that SNM has been proposed as a means to protect potentially useful innovations from full market competition, while specialist niches supply technologies to few customers in more stable environments. Incumbent technologies at the stage of decline may also retreat to niches where they can still remain competitive. Finally, it is suggested that further research on innovation niches would extend our understanding of technology dynamics.     

Strategic niche management: towards a policy tool for sustainable development

Strategic niche management (SNM) is a recently developed approach that could help induce a broad socio-technical transition towards more sustainable development. It is designed to facilitate the introduction and diffusion of new sustainable technologies through protected societal experiments in fields such wind energy, biogas, public transport systems, electric vehicle transport and eco-friendly food production. A major challenge in SNM concerns the processes by which such experiments can evolve into viable market niches and ultimately contribute to a broader shift towards sustainable development. This paper sheds more light on this issue by systematically consolidating the main SNM studies, and by bringing in new insights from the literature that is in some sense complementary to SNM. These are studies on the development and commercialisation of radical innovations in large companies, and literature about infant industry protection and broader industrialisation processes in developing countries. A number of suggestions for implementing SNM are given.     

Endogenous recessions: The creative destruction effect of final product novelty

In this paper we build a basic macroeconomic model aimed to grasp some aspects of the inner functioning of macroeconomic fluctuations. We highlight a mechanism through which the appearance of a product innovation results in an eventual reduction of the aggregate economic activity. When a new product appears, demand moves towards this more attractive product. The ‘creative destruction’ effect in this context is represented by the resources lost when firms producing old varieties exit the market due to the shortage of demand. Because firms producing a given product receive on average the same amount of demand, exits happen to be highly synchronized. We use this fact to explain the fluctuation asymmetries observed in real data. We test the ability of the model to meet features of real data against the United States' GDP in the 1950–1992 period.     

From necessities to imaginary worlds: Structural change,product quality and economic development

In this paper we explore how innovation and structural change affected economic development in the long run, by which we mean a period such as the one between the industrial revolution and the present. We separate the period since the industrial revolution into two sub periods, which we call ‘necessities’ and ‘imaginary worlds’ and focus on three trajectories, increasing productive efficiency, increasing output variety, and increasing output quality and differentiation. In the paper we show how a combination of the three trajectories gave rise to the transition between ‘necessities’ and ‘imaginary worlds’ and propose a mechanism of economic development which could have given rise to the type of economic system which we can observe today. To create growing output quality and differentiation higher competencies were required. These higher competencies required higher levels of education and demanded higher wages, which contributed to raise consumers' purchasing power. These phenomena, combined with the income effect of the creation of new sectors, generated the disposable income with which consumers could purchase the new, higher quality, non necessities, goods and services generated by innovation. In the paper we study the impact of several model parameters on the stability of the virtuous circle previously described.     

The take-off of an interactive innovation: Evidence from China

An interactive innovation can be defined as an end-user application which is subject to network effects at both the demand and supply sides. As a result of network effects, the diffusion of such an innovation is predicted to follow a take-off curve coinciding with the advent of a critical mass of adopters. The current literature on innovation diffusion, mainly focusing on the demand-side dynamics, such as information cascades and herding behaviors among potential adopters, is not sufficient to explain the take-off (or the failure) of interactive innovations. In this paper, we present and examine a case study of the take-off of an interactive innovation, namely the caller-ring-back-tone (CRBT) and mobile music - mobile value-added services (MVAS) - in China. We find that supply-side dynamics, such as choices of platform strategies, helped drive the take-off of this innovation within China's institutional boundaries. The paper makes a contribution in two ways: first, it presents an ‘inside-out’ view of a unique case of take-off phenomenon; and, second it provides an integrated view combining factors from both the demand and supply sides to explain the take-off phenomenon, which is rare in empirical studies.     

Demand articulation in intermediary organisations: The case of orphan drugs in the Netherlands

Several aspects of a technology are uncertain when it is in its emerging phase, e.g. the demand for a technology. Demand articulation processes are regarded as important, but till now it is often treated as a black box. We present a conceptual framework for the analysis of demand articulation processes inside intermediary organisations, and in interaction with other stakeholders. The empirical basis of this framework is provided by a case study involving an event history analysis, in which the occurrence and the contents of demands are followed over time. We studied the processes within the ‘Dutch Steering Committee Orphan Drugs’, an intermediary organisation that supports new and emerging technologies in the context of orphan drugs. Our results show that due to the activity of the intermediary organisation demand articulation occurred, that interactions exist between the demands and the organisation's underlying values, and that in interaction with other actors a debate on the reimbursement of new drugs is settled. The major contribution of this paper lies in the design of a framework for studying demand articulation processes in intermediary organisations and the resulting impacts on the development of emerging technologies. In addition, the paper provides insights in the possibilities to reinforce the role of the intermediary organisation studied.     

Regular Effective Demand Systems (REDS)

Empirical demand analysis is usually conducted on the basis of either ‘regularity’ or ‘flexibility’. This paper takes a middle ground between ‘regularity’ and ‘flexibility’, offering a compromise in the form of a new specification termed ‘REDS’.     

Can corporate social responsibility resolve the sanitation question in developing Asian countries?

The existing state of sanitation in developing Asian countries fails to deliver a level of service that is adequate for meeting the human right to a standard of living consistent with dignity and health, or for sustaining the capacity for future generations to have access to clean water resources and healthy ecosystems. We argue that translating the current neo-centralised technologies and institutional arrangements mainstreamed by industrialised countries would not resolve the problem in the context of developing countries. Instead it is necessary to ‘leap frog’ to the emerging technological and institutional arrangements that are responsive to current needs and contexts and to potential risks. The sustainability focus and often decentralised technologies of this emergent stage in sanitation present many opportunities for new actors to enter the urban sanitation industry. At the same time, there are many barriers to entry, particularly from the perspective of conventional business management focused on increasing shareholder value.We propose that perspectives from the corporate social responsibility discourse have the potential to provide both the ‘pull’ for seizing the business opportunity for profit while serving social needs, and the ‘push’ to overcome the barriers in order to serve a wider social purpose for corporations. The wealth of nations, at least as reported in ubiquitous GDP terms, has greatly increased through the activities of corporations driven by a profit motive; but the increased poverty, injustice and ecosystem degradation that have resulted from economic activity suggest that corporations perhaps ought to have regard for broader concerns beyond shareholder value. We explore how the alternative relational view of a corporation, as a metaphorical person within society who adopts a moral code consistent with both Buddhist economics and Adam Smith's philosophy, may facilitate profitable corporations that provide better economic, ecological and social outcomes in serving the need for sustainable sanitation services in developing Asian countries.     

A bibliometric account of the evolution of EE in the last two decades: Is ecological economics (becoming) a post-normal science?

In ecological economics the debate on formalism and formalization has been addressed in the context of a lively discussion on ecological economics as a ‘post-normal’ (versus ‘normal’) science. Using ecological economics (EE) as a ‘seed’ journal and applying bibliometric techniques to all (2533) the articles published in EE from January 1989 to December 2009, we analyze the evolution of the field of ecological economics aiming to shed light on this debate. We observe the predominance (and increased relevance) of certain research topics: ‘Methodological issues’, ‘Policies, governance and institutions’ and ‘Valuation’. Moreover, ‘Collective action’, ‘Technical change and the environment’ and ‘Values’ stand as emergent themes of research. Finally, we note that ecological economics experienced an ‘empirical turn’ reflected in a shift away from exclusively formalized papers towards exclusively empirical and, to a larger extent, ‘formal and empirical’ ones. The combination of the prominent and emergent topics and the ‘empirical turn’ mirrors the increasing awareness among researchers in the field of the need to address a key specificity of ecological economics — the interdependence of the economic, biophysical and social spheres. On this basis, we argue that at least through the lens of EE, ecological economics has evolved towards a post-normal science.     

Bidding for brains: Intellectual property rights and the international migration of knowledge workers

We introduce international mobility of knowledge workers into a model of Nash equilibrium IPR policy choice among countries. We show that governments have incentives to use IPRs in a bidding war for global talent, resulting in Nash equilibrium IPRs that can be too high, rather than too low, from a global welfare perspective. These incentives become stronger as developing countries grow in size and wealth, thus allowing them to prevent the ‘poaching’ of their ‘brains’ by larger, wealthier markets.     

Learning or lock-in: Optimal technology policies to support mitigation

We investigate conditions that amplify market failures in energy innovations, and suggest optimal policy instruments to address them. Using an intertemporal general equilibrium model we show that ‘small’ market imperfections may trigger a several decades lasting dominance of an incumbent energy technology over a dynamically more efficient competitor, given that the technologies are very good substitutes. Such a ‘lock-in’ into an inferior technology causes significantly higher welfare losses than market failure alone, notably under ambitious mitigation targets. More than other innovative industries, energy markets are prone to these lock-ins because electricity from different technologies is an almost perfect substitute. To guide government intervention, we compare welfare-maximizing technology policies including subsidies, quotas, and taxes with regard to their efficiency, effectivity, and robustness. Technology quotas and feed-in-tariffs turn out to be only insignificantly less efficient than first-best subsidies and seem to be more robust against small perturbations.     

Consumer support for environmental policies: An application to purchases of green cars

This paper focuses on how consumer motivation can be tapped in order to encourage the adoption of cleaner technologies. Consumers are heterogeneous — they may be guided by intrinsic motivation or extrinsic motivation. While information provision policies (such as the energy label for cars) may be effective in encouraging certain consumers to adopt green cars, financial incentive schemes (such as subsidies or fines) may be more persuasive for extrinsically-motivated consumers. We develop a dynamic theory of adoption of environmental innovations, in which information-provision policies are followed by financial incentives (first ‘carrot’, then ‘stick’ incentives). Analysis of a survey dataset of Swiss households observes considerable heterogeneity in terms of support of information-provision or financial incentive policies, in line with our conjectures. Our results will be of particular interest to policymakers interested in guiding consumers towards cleaner technologies.