The Two Faces of Market Support – How Deployment Policies Affect Technological Exploration and Exploitation in the Solar Photovoltaic Industry

ETH Zurich, Department of Management, Technology, and Economics, Weinbergstrasse 56/58, 8092 Zurich, Switzerland
Research Policy (Impact Factor: 2.85). 02/2013; 42(4):989-1003. DOI: 10.1016/j.respol.2013.01.002


The recent years have seen a strong rise in policies aiming to increase the diffusion of clean energy technologies. While there is general agreement that such deployment policies have been very effective in bringing technologies to the market, it is less understood how these policies affect technological innovation. To shed more light on this important question, we conducted comparative case studies with a global sample of 9 firms producing solar photovoltaic (PV) modules, complemented by in-depth interviews with 16 leading PV industry experts. We propose that, on the one hand, policy-induced market growth serves as an important catalyst for innovative activity as it raises the absolute level of firm investments in technological exploration. On the other hand, however, deployment policies create an incentive for firms pursuing more mature technologies to shift their balance between exploitation and exploration toward exploitation. Firms focusing on less mature technologies cannot tap the potentials of exploitative learning to the same extent as those with more mature technologies. Therefore, stimulating strong market growth may raise the barrier to market entry for less mature technologies. We conclude that, when designing deployment policies, great care should be taken to avoid adverse effects on technological diversity and a premature lock-in into more established technologies.

Download full-text


Available from: Joern Hoppmann, Mar 15, 2014
    • "The literature provided large evidence on the relevance of both demand-pull and technology-push instruments in shaping the dynamics of eco-innovation (see for instance Del Río 2009; Horbach et al. 2012; Newell 2010; Rennings 2000). However, a crucial issue is represented by the balance between the two categories of instruments in the policy mix and the differentiated effects with respect to the dynamics of environmental innovation at different stages of technological and commercial maturity, and with respect to the different types of innovative activities (Hoppmann et al. 2013; Nemet 2009; Sagar and van der Zwaan 2006). In particular, it has been claimed that public financial resources invested in demand-pull measures aimed at stimulating the deployment of renewable technologies (like those related to photovoltaic and wind energy) largely exceed investments in R&D supply policies (Laleman and Albrecht 2014). "

    Environmental Economics and Policy Studies 09/2015; DOI:10.1007/s10018-015-0131-4
  • Source
    • "More critically, although some authors have explicitly recognized complementarities between exogenous push and pull mechanisms, they have typically neglected the role of endogenous mechanisms. Finally, the few papers have started investigating the contribution of the endogenous drivers of RE diffusion and the impact of policy variability have mostly adopted a case-based approach (Hoppmann et al., 2013; 2014). Thus a rigorous and systematic empirical analysis of these effects is still lacking. "

    SSRN Electronic Journal 08/2015; DOI:10.2139/ssrn.2549617
  • Source
    • "For instance, selected scientific contributions claim that the public financing of demand-pull measures aimed at stimulating the deployment of renewable technologies has been disproportionate with investments in R&D policies (Frondel et al., 2008; Laleman and Albrecht, 2014; Nemet, 2009). An unbalanced structure of public budgets favouring specific policies may result in a strong orientation of the policy framework that can indeed produce serious consequences in terms of technological and environmental achievements and in terms of a reduced variety of alternative technologies, leading to a possible lockin effect in inferior technologies (Costantini and Crespi, 2013; Hoppmann et al., 2013). "
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper provides an empirical investigation of the role played by selected characteristics of the policy mix in inducing innovation in energy efficiency technologies. An original dataset covering 23 OECD countries over the period 1990-2010 combines the full set of policies in the energy efficiency domain for the residential sector with data on patents applied over the same period in this specific technological sector. The evidence of a positive policy inducement effect on innovation dynamics is enriched by the following main results: i) policy mix comprehensiveness is influential since countries adopting different instruments show a relatively higher positive inducement effect; ii) inconsistency problems between the different tools forming the policy mix may negatively influence innovation activities when the variety of policy instruments becomes excessive; iii) the different instruments forming the policy mix need to be well balanced in their relative strength in order to reduce potential negative lock-in effects; iv) the greater the external balance of the national policy strategy with the policy setting of other similar countries, the higher the inducement effect on the technological dynamics of the investigated country. Several suggestions for implementing effective policy strategies can be made in this case study that can be potentially extended to other technology domains.
Show more