Socio-technical transitions towards sustainability:

Dynamics and policy implications

Professor Frank GeelsSPRU, University of Sussex

12th International Conference on Industrial Technology Innovation (‘Heading towards a sustainable future’)

Taipei, Taiwan, 25-26 August 2011

Structure

1. Introduction

2. Multi-level perspective

3. Policy implications (and dilemmas)

4. Relevance for Taiwan

5. Concluding comments

1. Introduction: Green growth and green economy are hot topics

Green growth/economy entails

“systemic changes across the entire economy” (OECD, 2011: 16)

“fundamental rethinking of our approach to the economy” (UNEP, 2011: 38)

“business as usual would consign us to gradual decline” and that “it is the time to the bold and ambitious” (Europe 2020 Strategy)

(Radical) innovation is crucial.

But green growth reports traditional economics.

1) Neo-Keynesian:a) Increase public and private investments in green technology

b) Environmental regulation

2) Neo-liberal: prices and incentives (Carbon tax, cap-and-trade, subsidies, fiscal policies)

Conceptual problem:

Reports remain outside green growth:

• Inputs (R&D investments)

• Context (framework conditions + incentives)

Poor understanding of radical innovationNo explicit innovation policy, industry policy

Goals

1. Develop better understanding of radical innovation and (socio-technical) transitions

2. More specific policy proposals

2. Multi-level perspective on transitions

Focus on socio-technical systems

Socio- technical systemfor transportation

Culture and sym bolicm eaning (e.g . Freedom , ind ividuality)

Regulations and po licies(e.g. traffi c ru les,parking fees,em ission standards, car tax)

Road in frastructureand traffi c system(e.g. lights, signs)

Vehicle (artefact)

M arkets and user practices(m obility patterns, driver preferences)

I ndustry structure (e.g. car m anufacturers,suppliers)

M aintenance and d istribution netw ork (e.g. repair shops, dealers)

Fuel infrastructure (o il com panies, petro l stations)

Organizational field-analysisS up p ly ch ain : * m a te r ia l su p lie r s * co m p o n e n t su p p lie r s * m a c h in e s u p p lie rs

U sers

P ro duc tion ,indu stry :* f irm s* e n g in ee r s , d e s ig n e r s

R esearch :* u n iv e rs itie s* te c h n ic a l in s ti tu te s* R & D la b o ra to r ie s

P o licy, pub lic au thoritie s :* E u ro p e a n C o m m is s io n , W T O , G AT T* G o v e rn m e n t , M in is tr ie s , P a r lia m e n t* L o c a l a u th o ri tie s a n d e x e c u t iv e b ra n c h e s

S oc ieta l g ro ups:(e .g . G re e n p e a c e ,m e d ia , b ran c ho rg a n is a tio n s)

Multi-level perspective

N ich es(n ove lty )

S ystem /reg im e

L an dscap e

In crea sing s truc tu ra tion o f ac tiv ities in lo ca l p rac tices

Regime: Lock-in, path dependence

Economic: a)vested interestsb)sunk investments (competence, infrastructure) c)scale advantages, low cost

Social: a)cognitive routines make ‘blind’ (beliefs) b)alignment between social groups (‘social capital’) c)user practices, values and life styles

Politics and power:

a) Opposition to change from vested interests

b) Uneven playing field + policy networks

Analytical problem:

How to overcome lock-in?

N ich es(n ove lty )

S ystem /reg im e

L an dscap e

In crea sing s truc tu ra tion o f ac tiv ities in lo ca l p rac tices

•Protection from mainstream market selection•Nurturing of ‘hopeful monstrosities’ (Mokyr)•Carried by entrepreneurs and small social networks

Time

Product performance Invading product

Established product

T (1) T (2)

Niches for radical innovation

Socio-technical landscape

•Exogeneous backdrop of action•Heterogeneous

T im eT im e

L a n d sc a p e d e v e lo p m e n ts p u t p re s su re o n e x is tin g re g im e , w h ic h o p e n s u p , c re a tin g w in d o w s o f o p p o rtu n ity fo r n o v e lt ie s

S o c io - te c h n ic a l re g im e is ‘d y n a m ic a lly s ta b le ’ .O n d iffe re n t d im e n s io n s th e re a re o n g o in g p ro c e ss e s

N e w c o n f ig u ra tio n b re a k s th ro u g h , ta k in ga d v a n ta g e o f ‘w in d o w s o f o p p o rtu n ity ’ . A d ju s tm e n ts o c c u r in so c io - te c h n ic a l re g im e .

E le m e n ts a re g ra d u a lly l in k e d to g e th e r,a n d s ta b ilis e in a d o m in a n t d e s ig n .In te rn a l m o m e n tu m in c re a se s .

S m a ll n e tw o rk s o f a c to rs s u p p o r t n o v e lt ie s o n th e b a s is o f e x p e c ta tio n s a n d fu tu re v is io n s .L e a rn in g p ro c e s se s ta k e p la c e o n m u ltip le d im e n s io n s .D iffe re n t e le m e n ts a re g ra d u a lly l in k e d to g e th e r in a se a m le ss w e b .

N e w s o c io - te c h n ic a lre g im e in f lu e n c e s la n d s c a p e

Tech n o log ica ln ich es

S oc io -tech n ica l’lan d scap e

S oc io -tech n ica lreg im e

Tec hno logy

M arke ts, u se r p re ferences

C u ltu reP o lic y

Scienc eIndustry

E x te rn a l in f lu e n c e s o n n ic h e s(v ia e x p e c ta tio n s a n d n e tw o rk s)

3. Policy implications and dilemmas

Two-pronged strategy:

1)Niche-level: Stimulate radical innovation

2) Pressure on regime: taxes, regulations, incentives

1) Strategic Niche Management (SNM)

• Radical innovations deviate from regime, and are often pioneered by

- engineers/inventors/pioneers- entrepreneurs/start-up firms

• Niches are ‘protected spaces’ that nurture radical innovations

• They help radical innovations bridge the ‘valley of death’

Crossing the valley of death

Niches nurture novelties when they cannot (yet) compete on mainstream markets

Time

Product performance Invading product

Established product

T (1) T (2)

Invention Innovation Time lag (years)

electronic digital computers 1939 1943 4

float glass 1902 1943 41

fluorescent lighting 1901 1938 37

helicopter 1904 1936 32

jet engine 1928 1941 13

magnetic tape-recording 1898 1937 39

radar 1925 1934 9

radio 1900 1918 18

synthetic detergents 1886 1928 42

television 1923 1936 13

transistor 1948 1950 2

zipper 1891 1923 32

Time lag between invention and innovation (Clark et al, 1981)

• Niches are initially unstable and fragile.

• They protection or support from:- Government subsidies- Special users (willing to accept teething problems)

• Niches are carried by concrete R&D projects, demonstration projects

… is carried byprojects in differentlocal practices

Global niche-level(e.g. the emerging field of PV solar cells)

Innovation programs should manage a portfolio of projects:- sharing of knowledge between projects- articulation of best practices, search heuristics

S ha red ru le s ( sea rch heu ris tic s ,expec ta tion s, ab strac t theo ries , te ch n ica l m od els)

p rob lem agendas ,

A g g re g a tio n ,le a rn in g

G loba l lev el(com m un ity,fie ld )

L ocal p ro jects ,c arr ied by localne tw ork s,cha rac terisedby loca l va rie ty

E m erg in gtechno lo g ica ltra jec to ry

F ra m in g , c o o rd in a tin g

Green innovation programs should address interactions

between:

1) Visions, expectations: a) set direction, b) attract attention and funding

2) Learning processes (technology, user practice, policy, infrastructure)

3) Network building: diverse stakeholders. Incumbent firms and new entrants.

A c c e p te d v is io n s a n d e x p e c ta tio n s (o n fu n c tio n a l ity ) fo rm a g en d a o f e m e rg in g f ie ld

R e s o u rc e s + re q u ire m e n ts(f in a n c e , p ro te c t io n ,s p e c if ic a t io n s )

A r te fa c t- a c tiv ity : P ro je c ts in lo c a l p ra c tic e s R & D p ro je c ts , p i lo t p ro je c ts )(

G lo b a l n e tw o rk o f a c to r s (e m e rg in g c o m m u n ity )

O u tco m e s a n d n e w p ro m is e s b y lo c a l a c to rs

C o g n i tiv e , fo rm a l a n d n o rm a tiv e ru le s(k n o w le d g e , re g u la tio n s , b eh a v io u ra l n o rm s)

L o c a l p rac tices

G lo b a l lev e l (em erg in g fie ld )

L e a rn in g ,a r t ic u la tio na g g re g a tio n

E n ro l m o re a c to r s

A d ju s t e x p e c ta t io n s

Dynamic model of niche development

Green growth required multiple types of policy instruments

Top-down (command-and-control)

Market model (bottom up)

Policy networks and processes

Strategy Regulations specify what actors should do

Provide incentives for rational actors

Modulate ongoing processes

Foundation scientific disciplines

Classic political science

Neo-classical economy

Sociology, innovation studies, neo-institutional political science

Governance instruments

Formal rules, regulations and laws

Financial incentives (subsidies, taxes, feed-in-tariffs)

Learning processes, network management through seminars and strategic conferences, experiments, vision building at scenario workshops, public debates

Policy mix differs around world (varieties of capitalism)

• Liberal Market Economies (LME): USA, UK, Canada, Ireland, New Zealand, Australia.

• Coordinated Market Economies (CME): Germany, Denmark, Netherlands.

• State-influenced Market Economies (SME): France, Spain, Italy, Korea, Taiwan, Japan.

Green growth leaders from CME and SME

4. Relevance of green growth for Taiwan?

Taiwanese economic miracle (1960-1990)

But problems since late 1990s

Green growth as next phase in Taiwan’s innovation policy?

1. labour-intensive exports (1960s): textiles

2. capital-intensive sectors (1970s-1980s): ship-building, heavy and chemical industries

3. technology-intensive sectors (1990s): electronics, IT, machinery, biomedical and advanced materials, energy and resources, civil aerospace.

4. Green technologies ???

Current green growth leaders

• Germany, e.g. world-leading solar PV industry

• Denmark, e.g. world-leading wind turbines

• Korea: aggressive green growth plan

• China: Green export-oriented Five Year plan

5. Concluding comments

• Green growth attracts much attention

• Taiwan could strategically position itself regarding other countries

• And implement smart innovation policy

Two deviations from 1960s economic miracle:

1)‘Catch up’ differs from uncertain future

2)Changes in Taiwan’s governance structure

1) Catch-up to technology frontier has a clear direction. Strong state implements vision.

Green growth is open-ended and can follow many paths.

Vision-building should be interactiveNeed portfolio management Innovation management through trial-and-

error (more evolutionary such as SNM)

2) Taiwan changed from authoritarianism to democracy (1980s, 1990s)

Traditional top-down style no longer works

Green economy requires different governance: - More collaboration between state and industry (CME?)- Public support from civil society and citizens

SNM as model for collective learning and vision building

Taiwan is well-placed because of sector-specific consultation bodies, agencies and research institutes (ITRI)