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A dynamic perspective on environmental innovation and national competitiveness


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https://refubium.fu-berlin.de/handle/fub188/3954
http://dx.doi.org/10.17169/refubium-8154
List of figures 2 List of tables 2 List of abbreviations 3 Summary 4 Summary 8 1 \. Introduction 13 1.1. The global diffusion of environmental technologies as a key to sustainable development 13 1.2. Policies for promoting markets for environmental technologies in a changing global economy 13 1.3. Central research questions 14 2 \. Brief Review of Current Debates in the Literature and Identification of Key Research Objectives 15 2.1. Environmental innovation and national competitiveness 15 2.1.1. Lead markets for environmental innovation in a changing world 15 2.1.2. The changing geography of innovation and industrial development in emerging environmental technologies 17 2.2. Policies for promoting environmental innovation in a changing world 19 2.2.1. The role of government policy for promoting environmental innovation and national competitiveness 19 2.2.2. Assessing policies for the promotion of environmental technologies 19 3 \. Research Case: The Solar Energy Sector 20 4 \. Research methods 22 4.1. Papers # 1 and # 2 23 4.2. Papers # 3 and # 4 25 5 \. Summary and Key Findings of the Four Papers 27 5.1. Paper # 1: The concept of “lead markets” revisited: Contribution to environmental innovation theory 28 5.2. Paper # 2: Dynamics of a Policy- Driven Market: The Co-evolution of Technological Innovation Systems for Solar Photovoltaics in Germany and China 28 5.3. Paper # 3: Towards an integrated approach to promoting environmental innovation and national competitiveness 29 5.4. Paper # 4: Assessing policy strategies for the promotion of environmental technologies: A review of India’s National Solar Mission 31 6 \. Key Conclusions and Questions for Future Research 33 6.1. Dynamic interdependencies between industrialized and emerging countries in emerging environmental technology fields 33 6.2. Governing environmental innovation in a competitive global economy 34 7 \. References 36 8 \. Annex: Papers 43 Paper # 1: The concept of “lead markets” revisited: Contribution to environmental innovation theory 45 Paper # 2: Dynamics of a policy-driven market: The co-evolution of technological innovation systems for solar photovoltaics in China and Germany 63 Paper # 3: Towards an integrated approach to promoting environmental innovation and national competitiveness 89 Paper # 4: Assessing policy strategies for the promotion of environmental technologies: A review of India's National Solar Mission 113
dc. description. abstract
It is widely accepted that sustainable development is dependent on innovation in environmental technologies and their global diffusion. Simultaneously, innovation in environmental technologies is increasingly perceived as a pathway to sustaining national competitiveness and enabling future economic development. Correspondingly, global competition in the field of environmental technologies has increased markedly. Not only industrialized countries - the traditional leaders in this field - but China and other emerging economies are positioning themselves to capture leadership positions in the related industries (Gallagher 2014). Increased global competition is placing pressure on policy makers to help domestic firms compete in this growing sector of the economy. As pointed out in the European Commission’s 2020 growth strategy, Europe’s first mover advantages in the field of green solutions are being challenged by important competitors, most notably the US and China (European Commission 2010, p. 14). The questions that this raises are particularly controversial, as markets for environmental technologies are typically policy-driven. Market support policies play a crucial role in enabling the development and diffusion of these technologies (Jänicke & Lindemann 2010). In this context, market support for environmental technologies is increasingly viewed as a new generation of industrial policy. Rather than representing a mere subfield within the realm of environmental policy, it is considered a strategic investment in building a competitive advantage in an emerging industrial sector. At the same time, the growing role of emerging economies and the related competitive pressures are raising new questions regarding the effectiveness of such a green industrial policy approach. In the field of solar photovoltaics, for instance, critics have argued that German market support has mainly benefited suppliers abroad, most notably in China (EFI 2013; BMBF 2011). Against this background, this thesis seeks to answer the following inter-related questions: 1 \. How are developments in important emerging economies influencing the global dynamics of innovation and economic competition in policy-driven markets for environmental technologies? 2 \. What are the implications of these global dynamics for the design and assessment of policies aimed at promoting innovation in environmental technologies, while sustaining national competitiveness? The thesis consists of four papers, two of which aim to answer the first research question (Papers # 1 and # 2) and two of which focus on answering the second research question (Papers # 3 and # 4). Each pair of papers includes both a primarily conceptual (Papers # 1 and # 3) and a primarily empirical contribution (Papers # 2 and # 4). Both empirical papers draw on case studies of the solar energy sector, more specifically the field of solar photovoltaics (PV). As an archetypical example of a policy-driven market, the solar photovoltaics sector is a particularly suitable case for exploring the questions outlined above. Conceptually, all four papers build on evolutionary and system-based approaches to studying environmental innovation and technological change. In particular, they draw on literature in this field, which discusses the link between environmental innovation and national competitiveness and the role of policy in this context. The contribution of each paper is briefly outlined in the following: Paper # 1: The concept of “lead markets” revisited: Contribution to environmental innovation theory Paper # 1 focuses on the lead market concept and discusses its key contributions to the literature on environmental innovation and as well as policy debates on the relationship between environmental innovation and economic competitiveness. It finds that it offers a unique approach for capturing how the role of cross-country competitive dynamics influences the global diffusion of environmental innovations. Hence, the concept has also offered an important entry point for policy debates on the promotion of environmental innovation and national competitiveness. Moreover, the literature on lead markets has offered important empirical evidence of the global diffusion of policy-driven markets for environmental technologies. In doing so, it has provided an empirical basis for the claim that ambitious and well-designed environmental policies may provide early mover advantages for firms in countries that anticipate global regulatory trends. At the same time, the lead market concept suffers from a number of important weaknesses. Among a number of gaps that are identified, two are particularly salient for addressing the first of the two research questions formulated above. Firstly, the original lead market literature has focused exclusively on competition between OECD countries. It does not yet reflect the increasing role of emerging economies, in particular China, within the global economy in general and in the field of environmental technologies in particular. Secondly, the lead market concept builds on the strong assumption that the global diffusion of demand typically precedes the globalization of supply in emerging industries. The dynamics of supply-side competition during the process of lead market development are not considered. To close these important gaps in the literature, the paper outlines a number of questions for further research. Among other things, it calls for research on the dynamic interaction between lead and lag markets within a global system of innovation. It is this question that is taken up in the following paper (Paper # 2). Paper # 2: Dynamics of a Policy-Driven Market: The Co-evolution of Technological Innovation Systems for Solar Photovoltaics in Germany and China Based on the concept of technological innovation systems (TIS), paper # 2 develops an analytical framework for analyzing the role of geographical differences and cross-country interdependencies in the dynamic development of emerging technology fields. The central pillar of this framework is the set of seven system functions developed by Hekkert et al. (2007) for the analysis of TIS functional dynamics. Adding to this, the paper proposes the concept of asymmetrical yet co-evolving country-level TIS. The concept of co-evolution is defined as a development process characterized by reciprocal influences between two or more sub-systems. These reciprocal influences in turn are enabled by what is referred to as direct transnational linkages as well as more indirect channels, which manifest themselves in the form of cross-country spillovers and feedbacks. This analytical framework is applied for the dynamic analysis of the co-evolutionary process of TIS development in the field of crystalline-based solar PV technologies, focusing on developments in Germany and China between 1999/2000 and 2010/2011. The central empirical finding of the paper is that developments in Germany and China were not only inter-dependent but also highly complementary in enabling the development of the sector. While developments in German were crucial drivers of the rapid expansion of demand, the Chinese system of innovation and production represented a key to global supply-side expansion and the resulting cost reductions. It was this combination of inter-related developments, which enabled the dynamic development of the sector during the time period under consideration. These empirical findings validate the proposed concept of co-evolving country-level TIS and provide the basis for revising the previous lead-lag market assumption. Although the chosen case study can only describe one alternative development pathway to the previous lead-lag market model, it offers a first entry-point for exploring different types of global development trajectories. Paper # 3: Towards an integrated approach to promoting environmental innovation and national competitiveness Paper # 3 explores the more focused question of how governments can promote environmental technologies while sustaining national competitiveness. The paper provides a review of the existing literature on innovation-oriented environmental policy, exploring neoclassical approaches and approaches rooted in evolutionary theories of economic development and technological change. These approaches are then contrasted with current debates in the literature on economic development and growth. Key finding of the paper is that recent advances in the latter literature are making its policy implications increasingly compatible with those from evolutionary approaches to innovation-oriented environmental policy. Both acknowledge that innovation and technological change are highly country-specific processes, which require adaptive policy mixes tailored to the particular innovation system. Moreover, designing and implementing such a policy mix - whether to promote economic competitiveness or more environmentally friendly technologies - requires the same basic set of governance mechanisms. These findings suggest increasing scope for integrating policies for the promotion of environmental innovation and economic competitiveness. To develop such an approach in practice requires an explicit consideration of the dynamics of international competition and technological change. Drawing on examples from the German wind and solar sectors, the paper argues that pioneering environmental policies do offer opportunities for building longer term competitive advantage. However, the particular outcome depends on additional factors, like the domestic endowment structure and the ability of domestic firms to compete in particular segments of the supply chain. An integrated approach to promoting environmental innovation and national competitiveness, the paper concludes, should combine policies to enable environmental innovation with targeted supply-side measures to support the most promising segments of the emerging supply chain. Finally, competition in markets for environmentally-friendly products and technologies is not only a matter of economic competition but also depends on the diffusion of the related standards and regulatory solutions. Hence, a further element of an integrated approach to environmental innovation and national competitiveness is captured in the concept of an “environmental foreign policy” (Jacob & Bär 2014). An active promotion of the transfer of domestic regulatory frameworks can serve as a vehicle for encouraging related technology exports. Paper # 4: Assessing policy strategies for the promotion of environmental technologies: A review of India’s National Solar Mission Building on the perspective developed in paper # 3, paper # 4 then develops a framework for assessing policies for the promotion of environmental technologies. The paper begins with a critical review of the literature on policy mixes and related approaches for their assessment. It finds that the existing literature has defined a number of generic concepts for assessing the suitability of policy mixes, which are unrelated to any particular policy field. Rayner and Howlett (2009) state that so-called “optimal integrated policies” require a policy design “in which multiple policy goals can be coherently pursued at the same time, and second, policy instrument mixes are consistent in the sense of being mutually supportive in the pursuit of policy goals ”(p.100). The paper challenges the concept of an optimal policy mix and its emphasis on coherence and consistency as central assessment criteria. Instead it highlights the normative dimension of policy making and the need to balance inherent policy trade-offs within a given policy mix. On this basis, the concept of a policy strategy is proposed as an alternative to the existing policy mix concept. Drawing on existing literature as well advisory work conducted for the German Ministry of the Environment by the Policy Assessment Group at the Environmental Policy Research Center (Jacob et al. 2012), a policy strategy is defined as the combination of the following three elements: Strategy content, composed of policy objectives and the measures designed to achieve them; • Strategy process, encompassing the process of policy development, implementation and adaptation; • Strategic capacity, including the capacities need for policy development, implementation and learning as well as the engagement of stakeholders. This generic strategy concept represents the basis for the subsequent development of a framework for the assessment of strategies for promoting environmental technologies. Building on a co-evolutionary perspective on environmental innovation and technological change, detailed assessment criteria for each of the elements are derived from the literature. Finally, the assessment framework is applied in an exemplary fashion to India’s Jawaharlal Nehru National Solar Mission (JNNSM). A key result of the assessment is that unresolved trade-offs between demand- and supply-side objectives are hampering implementation of the strategy. Furthermore, strong market support has come at the expense of measures to support other important system functions, such as the mobilization of resources and knowledge development and diffusion. To tackle both issues, the paper highlights the importance of process and capacity considerations. In particular, the paper identifies the need for a more active engagement of stakeholders in the policy process and the development of capacities for implementing effective supply-side measures. The paper concludes with a discussion of possible future applications as well as remaining weaknesses of the assessment framework. A key weakness of the framework - as well as the underlying literature - is the lack of more nuanced criteria for considering the political dimension of policy trade-offs. The development of criteria and analytical tools for incorporating political factors in policy strategies for promoting environmental technologies represents an important avenue for future research. One important step in this direction might be the systematic cross-country comparison of policy strategies and how these are embedded and shaped by country-specific governance mechanisms and political conditions. The proposed strategy concept offers an analytical framework for conducting such comparative analyzes. In a further step, such an analysis might address the interplay between different country-level strategies, an issue of increasing importance within the context of emerging technology fields.
dc. description. abstract
It is generally accepted that sustainable development depends, among other things, on the development and global diffusion of environmental technologies. At the same time, innovation in environmental technology is seen as an approach to strengthening national competitiveness and promoting future economic development. Accordingly, global competition in these technology fields has increased significantly. Not only industrialized countries, which have traditionally taken the leading role in this area, but also China and other emerging countries are now positioning themselves to take over technology leadership in individual branches of industry (Gallagher 2014). This global competition also means that politicians are increasingly looking for approaches to create competitive advantages for domestic companies in these growing branches of industry. In its growth strategy, the European Commission emphasizes that Europe's first mover advantages in the field of green solutions are being challenged by important competitors, especially from China and the USA (European Commission 2010, p.14). The questions this raises are particularly explosive, as environmental technology markets are highly dependent on environmental policy interventions.Market-creating measures, such as feed-in tariffs for renewable energies, are usually the basis for the development and spread of these technologies (Jänicke & Lindemann 2010). Such market-creating measures are now understood not only as a sub-area of ​​environmental policy, but also as an instrument for innovation and industrial policy. The development of new environmental technology markets is increasingly seen as an investment in building domestic competitive advantages in emerging industries. At the same time, the increasing competitive pressure means that the economic arguments for a green industrial policy are increasingly challenged. In the field of the photovoltaic industry, for example, critics claim that German market funding primarily benefited foreign and, in particular, Chinese providers (EFI 2013; BMBF 2011). Against this background, this dissertation project investigates the following questions that build on one another: 1 \. How do developments in important emerging countries influence global innovation processes and competitive dynamics in politically funded environmental technology markets? 2 \. What are the implications of these global competitive dynamics for shaping and evaluating policies to promote innovation in environmental technology while maintaining national competitiveness? The dissertation project consists of four articles. Two of these articles address the first research question (Articles # 1 and # 2) and two address the second research question (Articles # 3 and # 4). Each of these pairs consists of a predominantly conceptual contribution (Articles # 1 and # 3) and a predominantly empirical contribution to the literature (Articles # 3 and # 4). Both empirical contributions evaluate developments in the field of solar energy, especially in the photovoltaic sector. As a classic case of a politically funded market, the photovoltaic sector is particularly suitable for answering the research questions mentioned above. Conceptually, the dissertation project builds on existing evolutionary economic approaches from the literature on environmental innovation and technological change. Particular reference is made to literature in this area with a focus on environmental innovation, national competitiveness and the role of politics in this. The following is a brief summary of the four articles of the dissertation project: Article # 1: A reassessment of the “lead market” concept: its contribution to environmental innovation theory In Article # 1, a critical assessment of the lead market concept is made. In particular, the contribution of the concept to the scientific and political discussion on the subject of environmental innovation and competitiveness will be discussed. It is stated that the lead market concept offers the only conceptual approach to analytically record the influence of cross-border competitive dynamics in the context of the global spread of environmental innovations. The lead market literature has also provided important empirical evidence for the global diffusion of politically funded environmental technology markets. It has thus created an important basis for the hypothesis that a particularly demanding and innovation-friendly environmental policy can provide companies in the relevant pioneering countries with so-called early mover advantages. At the same time, the article also points out a number of deficits in the lead market concept. To answer the first research question of this dissertation project, two points should be emphasized. First, the analysis in the existing lead market literature is limited to OECD countries. It does not yet address the growing role of emerging countries, especially China, in the global economy in general and in particular in the field of environmental technology. Second, the lead market literature assumes that the diffusion of demand usually precedes the globalization of supply. The supply-side competition during the emergence of a lead market is not discussed. To fill these gaps, the article outlines a number of research questions. In particular, new research on the dynamic interdependencies between lead and lag markets is required within the framework of a global innovation system. This set of questions is then followed up in Article # 2 using developments in the photovoltaic sector. Article # 2: Dynamics of a politically funded market: Co-evolution of technological innovation systems in the photovoltaic sector in Germany and China Based on the concept of a technological innovation system (TIS), Article # 2 provides a framework for the analysis of geographical differences and cross-border interdependencies the development of newly emerging technology fields. The core of the analysis framework are the seven system functions for analyzing development dynamics of TIS, which are described in Hekkert et al. (2007) are presented. Building on this, the concept of asymmetrical and interdependent TIS, which develop simultaneously in a co-evolutionary process in different countries, is formulated. The concept of co-evolution is defined as a development process in which two subsystems influence each other in their development. The mutual influences between two country-specific TIS are made possible by direct transnational links and indirect channels that manifest themselves in the form of spillover and feedback effects. This analysis framework is then used in the article for the analysis of the TIS development process for the area of ​​crystalline silicon-based photovoltaic technologies in the countries of China and Germany in the period from 1999/2000 to 2010/2011. The most important empirical result of the analysis is that the development processes in Germany and China show not only interdependencies but also important complementarities within the framework of a global development process. While the development in Germany was the central driver of global demand, the processes in China represented a key for the expansion of the supply and the associated reduction in manufacturing costs. It is found that the interaction of these complementary development processes to a particular extent to the overall development of the Sector has contributed. These empirical findings confirm the aforementioned conceptual further development of the TIS approach and form the basis for a revision of the lead-lag market assumption in the lead market literature. The case study on the photovoltaic sector can of course only show an alternative development path to the lead-lag market model. However, it offers an important reference point for researching further global development paths. Article # 3: Towards an integrated approach to promoting environmental innovation and economic competitiveness Article # 3 explores the question of how a policy promoting environmental innovation can also contribute to maintaining national competitiveness. The article begins with an overview of the literature on innovation-oriented environmental policy from the area of ​​neoclassical economic theory as well as the area of ​​evolutionary economics and the approaches based on it for the analysis of innovation and technological change. These approaches are then compared with current economic discussions on economic development and growth. The article comes to the conclusion that the latest findings from growth theory and the associated economic policy implications show an increasing compatibility with evolutionary economic approaches of an innovation-oriented environmental policy. In both cases, it is pointed out that innovation and technological change depend to a large extent on the country context. For this reason, attention is drawn to the need for flexible policy approaches that have to be adapted to the respective country context. In addition, the development and implementation of such policy approaches - whether to support economic development processes or to promote environmental technologies - require the same basic governance mechanisms. This indicates that there is increasing scope for integrating these policy areas. The practical implementation of such an integrated policy requires the explicit consideration of international processes of technology development and the associated competitive dynamics. Using empirical examples from the field of wind and solar energy, the article argues that an ambitious environmental policy does indeed offer opportunities for building long-term competitive advantages. However, the result depends on other influencing factors, such as the existing economic structure and the competitiveness of domestic companies in different segments of the relevant value chains. An integrated approach to promoting environmental innovation and economic competitiveness, the article concludes, should be accompanied by targeted measures to promote domestic supply in particularly promising segments of the value chain. Ultimately, the question of competitiveness in markets for environmentally friendly products and technologies depends not only on purely economic factors but also on the diffusion of relevant environmental standards and regulatory approaches. An integrated funding policy should therefore also take up the approach of an environmental foreign policy (Jacob and Bär, 2014). Active promotion of the transfer of domestic regulatory models can be used as an instrument of export promotion. Article # 4: An approach to the evaluation of political strategies for the promotion of environmental technologies and an application using the example of the Indian National Solar Mission Building on the perspective presented in Article # 3, Article # 4 develops a detailed analysis framework for evaluating political approaches to the promotion of environmental technologies . The article begins with a critique of the literature on so-called policy mixes. The literature in this area has produced a number of generic concepts for evaluating a policy mix without addressing the specific challenges of individual policy areas. Rayner and Howlett (2009) state that so-called optimally integrated policies should be designed in such a way that several policy goals can be pursued in a coherent manner and the mix of policy instruments is consistent. This means that the instruments used should complement one another in achieving the policy goals. The article criticizes the concept of an optimal policy mix and the one-sided focus that the authors place on coherence and consistency. Instead, reference is made to the normative dimension of policy development and the challenge of inherent conflicting goals, which can be taken into account when designing a policy mix but not necessarily completely resolved. Following this critical appraisal, the concept of a policy strategy is therefore proposed as an alternative to the policy mix concept. Based on existing literature and the results of an advisory project by the Policy Assessment Group at the Research Center for Environmental Policy (Jacob et al. 2012), a policy strategy is defined based on the following three dimensions: • Strategy content, consisting of policy goals and the policy measures to achieve these goals, • Strategy process, consisting of the process of policy development, implementation and adaptation, • Strategic capacity, consisting of the capacities that are necessary for policy development and implementation as well as for the process of policy learning and the involvement of social actors. This generic strategy concept forms the basis for the development of the analysis framework for the evaluation of strategies for the promotion of environmental technologies. Based on co-evolutionary approaches to the analysis of environmental innovation and technical change, evaluation criteria for three dimensions of strategy are derived from existing literature. The analytical framework will then be used as an example for the assessment of India's Jawaharlal Nehru National Solar Mission (JNNSM). An important result of this assessment is that inherent conflicts between goals for the cost-effective expansion of the market on the one hand and the promotion of the domestic industrial location in the field of solar energy on the other hand represent an important obstacle to the successful implementation of the strategy. In addition, the strategy supports market expansion relatively unilaterally, while other important functions of the innovation system, such as the mobilization of resources and the development and dissemination of knowledge, are neglected. To address these challenges, the article highlights the important role of the strategy process and building strategic capacity. In particular, the more active involvement of social actors in the policy process and the development of capacities for supply-side support are emphasized. The article concludes with a discussion of a further application and the remaining weaknesses of the analytical framework. A central weakness of the approach - as well as the literature on which it is based - is the still very limited discussion of political aspects when assessing conflicting goals. The development of criteria and analytical instruments for the consideration of political influencing factors in the evaluation of political strategies for the promotion of environmental technologies is therefore an important area for future research in the field. One possible approach would be the implementation of a systematic, cross-border comparison of political strategies . The role of existing governance structures and political framework conditions for the design of the strategies would have to be discussed. The analytical framework presented in the article would provide a suitable basis for such research. In a further step, an analysis of the mutual influence of different country strategies would be of great interest. As shown in this dissertation project, mutual influences of this kind are becoming increasingly important in the area of ​​newly emerging technology fields.
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300 Social Sciences :: 320 Political Science :: 320 Political Science
300 social sciences :: 330 economics :: 330 economics
A dynamic perspective on environmental innovation and national competitiveness
dc. contributor. firstReferee
dc. contributor. furtherReferee
Professor Dr. Miranda Schreurs
urn: nbn: de: kobv: 188-fudissthesis000000099724-9
an assessment of policy and empirical evidence from the solar energy sector
A dynamic perspective on environmental innovation and national competitiveness issues
dc.title.translatedsubtitle
an assessment of policy and empirical evidence from the solar energy sector
Political and Social Sciences
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FUDISS_thesis_000000099724
Cumulative dissertation with publications in specialist journals
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FUDISS_derivate_000000017377
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