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.

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Available from: Joern Hoppmann, Mar 15, 2014
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    • "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
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    • "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). "
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    • "The changes that have affected the photovoltaic industry (mainly in terms of reductions in production costs, market prices, and photovoltaic systems) require an updated analysis of the economic market opportunities [17] to promote distribution energy models [18]. Additionally, any energy saving technics can represent the core business of the industry [19]. "
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