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Multi-Level Perspective on System Innovation: Relevance for Industrial Transformation

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This chapter describes how insights from several different disciplines can be integrated in a multi-level perspective, so as to contribute to an encompassing understanding of the dynamics of system innovation. The chapter also argues that a range of different policy instruments is needed to stimulate system innovations, and positions them in different phases and on different levels. Interesting topics for further research are also identified.
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Chapter 9
MULTI-LEVEL PERSPECTIVE ON SYSTEM
INNOVATION: RELEVANCE FOR INDUSTRIAL
TRANSFORMATION
Frank W. Geels
Department of Technology Management, Eindhoven University of Technology, IPO 2.10,
5600 MB Eindhoven, the Netherlands
Abstract: This chapter describes how insights from several different disciplines can be
integrated in a multi-level perspective, so as to contribute to an encompassing
understanding of the dynamics of system innovation. The chapter also argues
that a range of different policy instruments is needed to stimulate system
innovations, and positions them in different phases and on different levels.
Interesting topics for further research are also identified.
Key words: system innovation, multi-level perspective, policy implications, research
agenda
1. INTRODUCTION
The aim of this paper is to present an integrative conceptual perspective
on the dynamics of system innovations. An understanding of such dynamics
is important, because system innovations have recently received much
attention in environmental sustainability debates. Modern societies face
structural problems in several sectors. Agriculture, for instance, suffers from
the consequences of (over-) intensive production systems, such as manure
problems, ammonia emissions, and diseases like Bovine Spongiform
e-mail: f.w.geels@tm.tue.nl
© 2006 Springer. Printed in the Netherlands.
Disciplines 163–186.
163
Xand r Olshoorn and A nna J. Wieczorek, Understanding Industrial Transformation: Views from Different e
Chapter 9
Encephalopathy (BSE
22
) and ‘Foot & Mouth’. In the energy sector there are
problems such as oil dependency, reliability, and CO
2
and NO
x
emissions. In
the transport system there are problems of congestion, energy use, and CO
2
emissions and air pollution (particulate matter, NO
x
). These problems are
deeply rooted in societal structures and activities. To solve them the
Industrial Transformation (IT) project of the International Human
Dimension Programme (IHDP) argues that system changes are needed
(Vellinga and Herb, 1999). Several other recent contributions to the
sustainability debate also propose widening the analytical focus from cleaner
artefacts to cleaner systems (e.g. Unruh, 2000; Jacobsson and Johnson, 2000;
Berkhout, 2002).
In the Dutch fourth National Environmental Policy Plan (VROM, 2001),
the need for system changes has been rephrased as a need for transitions and
system innovations. Substantial improvements in environmental efficiency
(factor 2) may still be possible with incremental innovation and system
optimisation. But large jumps in environmental efficiency (factor 10) may
require system innovations and transitions. The promise of system
innovations is represented in Figure 1.
System innovations are not merely about changes in technical products,
but also about policy, user practices, infrastructure, industry structures and
22
Bovine Spongiform Encephalopathy (BSE) or mad cow disease.
Figure 1. Environmental efficiency and system innovation (Weterings et al., 1997: 18)
Time horizon (years)
Improvement in
environmental efficiency
Factor 10
Factor 5
Factor 2
510
20
Function innovation
= new system
Partial system redesign
System optimimisation
164
symbolic meaning, etc. To highlight that social and technical aspects are
strongly interlinked, I propose to rephrase system innovations as changes
from one socio-technical system to another. Figure 2 gives an example of a
socio-technical system in the transport domain.
The elements of socio-technical systems do not function on their own,
but are actively created and maintained by human actors embedded in social
groups. Figure 3 presents a stylised representation of some of the relevant
groups in modern western societies.
Figure 2. Illustration of the socio-technical transport system
Figure 3. Social groups which (re-)produce socio-technical systems (Geels, 2002a: 1260)
Research network
Producer
network
Suppliers
Financial network
Public authorities
User groups
Societal groups
* universities
* technical institutes
* venture capital
suppliers
* insurance firms
* material suppliers
* component suppliers
* machine suppliers
* European Commission
* National Ministries
Socio-technical system
for land-based road
transportation
Culture and symbolic
meaning (e.g.
freedom, individuality)
Regulations and policies
(e.g. traffic rules, parking fees,
emission standards, car tax)
Road infrastructure
and traffic system
(e.g. lights, signs)
Automobile (artefact)
Markets and user practice
s
(mobility patterns, driver
preferences)
Production system and
industry structure
(e.g. car manufacturers,
suppliers)
Maintenance an
d
distribution network
(e.g. repair shops, dealers)
Fuel infrastructure
(oil companies,
petrol stations)
Multi-level Perspective on System Innovation
165
Chapter 9
System innovations can be delineated as having the following
characteristics:
They involve co-evolution of a number of related elements;
They involve changes in the supply side (e.g. technology, knowledge,
industry structures) and the demand side (user preferences, cultural
meaning, infrastructure);
They involve a wide range of actors;
They are long-term processes (evolving over decades). This presents
challenges for effective and consistent policy interventions over political
timescales, and also for the analysis of ongoing transitions under policy
interventions.
Because of the ‘sustainability promise,’ there is increasing interest in
transitions and system innovations from policy-makers, NGOs, large firms
and others. The Stockholm Environment Institute, for instance, published a
book on the ‘Great Transition’ (Raskin et al., 2002). The American National
Research Council (NRC, 1999) and the Dutch Research Council NWO have
made transitions part of their research portfolio, and the IHDP bundles
research across the world by funding a science programme on industrial
transformation.
Although there is apparent interest from policy makers in system
innovations, there is little systematic knowledge about transitions from one
system to another. The main question this chapter aims to answer is: how do
system innovations come about? As an answer to this question, the chapter
describes a so-called multi-level perspective, in Section 3. This perspective
was built on insights from other disciplines. To indicate these backgrounds,
some of the building blocks are described in Section 2. Unfortunately, there
is not enough space to describe precisely how these building blocks add up
to the multi-level perspective (see Geels, 2004), but I will make brief
references to the building blocks in Section 3. There is also insufficient
space to give empirical examples, although references are provided to
empirical work. The paper does address policy suggestions from this
perspective (Section 4) and suggests a research agenda (Section 5).
2. SOME DISCIPLINARY BUILDING BLOCKS
Interesting insights can be found in a range of disciplines (see other
chapters in this book). Particular elements from the literature can be used as
building blocks for a more integrative perspective. This section briefly
describes some of these building blocks. The description is eclectic and
cannot do justice to all that has happened in different disciplines.
166
Sociology of technology
Sociology of technology highlights the notion that technologies are not
simply there, but are actively constructed by human actors and social groups.
Scholars in this discipline focus mainly on emerging technologies. Early in the
development of a technology, there is much flux and uncertainty about precise
technical characteristics, functional dimensions, markets and user preferences.
Gradually, these dimensions become aligned and stabilise, leading to dominant
designs and normal markets. Technologies, markets, user preferences, etc., are
thus seen as the outcome of articulation processes, learning and interaction.
Within this discipline there are several research streams with different point of
emphasis. I will provide some brief descriptions.
In the social construction of technology approach (SCOT) the focus is on
socio-cognitive processes, i.e., on giving meaning and interpreting in social
groups (Pinch and Bijker, 1987; Bijker, 1995). The main aim of the SCOT
approach is to understand the form and function of new technologies. Why
do new technologies stabilise into a particular form, and how are they used?
To answer this question, the SCOT approach studies the ideas and discourse
about technological artefacts (e.g. problem agendas, search heuristics,
guiding principles) in the social groups that are involved in the development
and use of those technological artefacts, e.g. engineers, users, policy makers,
social groups, etc. There is variation in the sense that different groups have
different ideas and propose different solutions, but gradually one idea and
solution become dominant, leading to consensus about the dominant
meaning of an artefact. Selection is thus seen as a socio-cognitive process
(closure and stabilisation of one interpretation in social groups).
In the socio-technical approaches of large technical systems (LTS) and
actor-network theory (ANT), the focus is on linkages in and around the
emerging technology. In both perspectives the dynamic is that heterogeneous
elements are gradually linked together, emphasising co-evolution.
In LTS-research the focus is on (somewhat heroic) system-builders, who
weave heterogeneous elements into a working system (Hughes, 1987; 1994;
Mayntz and Hughes, 1988; Staudenmaier, 1989). System-builders such as
Edison are ‘heterogeneous engineers.’ These engineers work not only on
physical materials, but also on people, texts, devices, city councils,
economics etc. Hughes (1987) coined the term ‘seamless web’ to indicate
the heterogeneous character of LTS. In the early phases, the web is fragile,
requiring system-builders to put in much work to uphold it. For example, as
the electricity network grows and stabilises, it gains ‘momentum’ and begins
to have coordinating effects (Hughes, 1994).
Multi-level Perspective on System Innovation
167
Chapter 9
The perspective of socio-technical linkages is most consistently
developed in ANT (Latour, 1987; 1991; Callon, 1991). New technologies
emerge from a start as heterogeneous configurations. In the early phase of a
new technology, the network consists of only a few elements and linkages.
Innovation is about the accumulation of elements and linking them together
in a working configuration. To achieve this, actors try to ‘enrol’ others, thus
widening the network. They also try to ‘translate’ others, i.e., assign them to
particular roles and manipulate them into positions that suit their own
purposes. In the ANT approach, enrolment and translation involve both
human and non-human actors, leading to deep ontological debates that go
beyond the purpose of this chapter. As the network is expanded and more
elements are tied together, a technology ‘becomes more real.’ Diffusion is
also a process of creating socio-technical linkages. The diffusion of an
artefact across time and space needs to be accompanied by an expansion of
linkages within which the artefact can function, e.g. test apparatus, spare
parts, maintenance networks, and infrastructure. ‘Thousands of people are at
work, hundreds of thousands of new actors are mobilised’ (Latour, 1987: 135).
A fourth stream in the sociology of technology highlights the importance
of expectations and strategic visions of the future. Shared ideas about the
future guide the direction of search activities. These visions can also be used
by product champions as a strategic resource to attract attention (and
funding) from other actors (Van Lente, 1993; Brown and Michael, 2003).
A fifth stream is formed by domestication studies. These look more
closely at the demand for new technologies (e.g. products), arguing that the
use of a technology involves more than simple adoption. New technologies
have to be ‘tamed’ to fit into concrete routines and application contexts
(including existing artefacts). Domestication involves symbolic and practical
work, in which users integrate the artefact in their user practices and
cognitive work, which includes learning about the artefact (Lie and
Sørensen, 1996). This means that consumption and adoption are themselves
acts of innovation. As users become acquainted with new artefacts, they may
develop new user routines and new functionalities.
Business studies
In recent years, there has been increasing interest from business studies in
radical product innovations, particularly because it was found that existing
firms often ‘wiped out’ of the market because they did not foresee the next
technological wave (Christensen, 1997). Some recent business studies
emphasise that the co-evolution of technology and markets is a highly
uncertain process, marked by setbacks and surprises, and with no guarantee
168
of success (e.g. Lynn et al, 1996; Leonard-Barton, 1995). Firms that
successfully navigated radical innovations engaged in various market
experiments with technical prototypes during the early phases of
development. Probing and learning was initially more important than
immediate success.
These companies developed their products by probing initial markets
with early versions of the products, learning from the probes, and probing
again. In effect, they ran a series of market experiments, introducing
prototypes into a variety of market segments (Lynn et al., 1996: 15).
Evolutionary economics
Evolutionary economics (EE) is a very wide field, which I cannot do
justice to here (see the chapter by Van den Bergh in this book). Many studies
have a primary focus on firms and economic development. Attention on
technology is then secondary and is only used to help explain economic
performance. Those studies have limited relevance for my research question.
But other EE studies take technological change as a focus in its own right.
For instance, Nelson and Winter (1982) and Dosi (1982) consider seriously
engineers’ and designers’ activities. Nelson and Winter (1982) argue that
human beings use cognitive frameworks and routines to make sense of the
world and guide activities. The search activities of engineers are guided by
cognitive heuristics; that is, instead of exhaustively searching in all possible
directions, engineers and R&D managers typically expect to find better
results in certain directions. In so far as firms differ in their organisational
and cognitive routines, there is variation in their technological search
directions and the resulting products. The products (and the underlying
routines and the firms which carry them) are selected in markets. Successful
products (and firms) continue their routines, while less successful firms die
out. When different firms share particular routines, these routines make up a
technological regime, which leads to technical trajectories on a sectoral
level. Technological regimes create stability because they provide a direction
for incremental technical development.
Institutional theory
Institutional approaches highlight the point that human actors are
embedded in social groups, and that the activities of social groups are
coordinated by institutions. Institutions are often confused with (public)
organisations (Scott, 1995). To avoid this confusion, the general concept of
‘rules’ also tends to be used. The function of institutions or rules is to guide
Multi-level Perspective on System Innovation
169
Chapter 9
(but not determine) the perceptions and activities of actors. Shared rules thus
provide co-ordination and stability. Following Scott (1995), one can
distinguish three kinds of rules: regulative, normative and cognitive. The
regulative dimension refers to explicit, formal rules, e.g. government
regulations, which structure the economic process through rewards,
incentive structures and sanctions. Examples are property rights, contracts,
patent laws, tax structures, trade laws and legal systems. These rules are
often highlighted by institutional economists (e.g. Hodgson, 1998; North,
1990). Normative rules are often highlighted by traditional sociologists (e.g.
Parsons, 1937). These rules confer values, norms, role expectations, duties,
rights and responsibilities. Sociologists argue that such rules are internalised
through socialisation processes. Cognitive rules constitute the perception of
reality and the cognitive frames through which meaning is made. Social and
cognitive psychologists have focused on the limited cognitive capacities of
human beings and how individuals use schemas, frames, cognitive
frameworks or belief systems to select and process information.
Evolutionary economists and sociologists of technology have highlighted
cognitive routines, search heuristics, exemplars, technological paradigms
and the technological frames of engineers in firms and technical
communities (see above).
Rules do not exist as single autonomous entities. Instead, they are linked
together and organised into social rule systems or rule regimes (Burns and
Flam, 1987). Regimes are thus semi-coherent sets of rules that are linked
together, and it is difficult to change one rule without altering others. The
alignment among rules gives a regime stability and ‘strength’ to coordinate
activities.
In this section some interesting insights from different disciplines have
been briefly discussed. The next section aims to describe an overarching
conceptual perspective that combines or situates these insights with regard to
each other.
3. A MULTI-LEVEL PERSPECTIVE ON SYSTEM
INNOVATIONS
Both evolutionary economists and institutional theorists argue that socio-
technical systems are stabilised by regimes that coordinate the activities of
actors and social groups. This stabilising force creates inertia, lock-in and
path dependence in existing systems. So it is an intriguing question how
transitions to a new system take place.
An answer to this question is provided by the multi-level perspective
(MLP) (Kemp, 1994; Schot et al., 1994; Rip and Kemp, 1998; Kemp, et al.,
170
2001; Geels, 2002a; 2002b). The MLP distinguishes three levels: meso,
micro and macro, which are not ontological descriptions of ‘reality,’ but
analytical and heuristic concepts to understand system innovations.
The meso-level is formed by socio-technical regimes. This concept builds
on Nelson and Winter’s (1982) ‘technological regimes’, but is wider in two
respects. First, while Nelson and Winter refer to cognitive routines, the MLP
regime concept refers to the wider category of ‘rules’:
A technological regime is the rule-set or grammar embedded in a
complex of engineering practices, production process technologies, product
characteristics, skills and procedures, ways of handling relevant artefacts
and persons, ways of defining problems; all of them embedded in institutions and
infrastructures (Rip and Kemp, 1998: 340).
While the cognitive routines of Nelson and Winter are embedded in the
practices and minds of engineers, regime-rules are embedded more widely.
Second, socio-technical regimes not only refer to the social group of
engineers and production firms, but also to other social groups. Socio-
technical systems are actively created and maintained by several social
groups (see above). Each of these social groups has its own distinctive
features and its own ‘selection’ environment and therefore each has relative
autonomy. At the same time, the groups are also interdependent and interact
with each other. Interdependence and linkage between sub-systems occurs
because activities of social groups are coordinated and aligned with each
other. This is represented with the concept of socio-technical regimes. By
providing orientation and co-ordination to the activities of relevant actor
groups, socio-technical regimes account for the ‘dynamic stability’ of socio-
technical systems. It is dynamic because innovation still occurs, but it is
stable because innovations are of an incremental nature, going in predictable
directions, leading to ‘technical trajectories.’ In evolutionary terms, socio-
technical regimes function as a selection and retention mechanism. The rules
in socio-technical regimes provide stability by guiding the perceptions and
actions of actors. Rules can thus be characterised as the ‘deep structure’ or
‘grammar’ of socio-technical systems. In a similar fashion, Nelson and
Winter (1982: 134) referred to routines as ‘genes’ of technological
development.
The micro-level is formed by technological niches, the locus for radical
innovations (‘variation’). Because the performance of radical novelties is
initially low, they emerge in ‘protected spaces’ to shield them from
mainstream market selection. Niches thus act as ‘incubation rooms’ for
radical novelties (Schot, 1998). Protection may occur in different forms. One
form is within companies, e.g. as strategic R&D investments. Governments
may add to the protection through R&D subsidies. Another form of
Multi-level Perspective on System Innovation
171
protection is through subsidised real-life projects or experiments. This means
stepping out from the laboratory into the wider world. These experiments
involve a wide range of actors, e.g. firms, users, suppliers, universities, local
and national authorities, and funding agencies. A third kind of protection is
provided by special market niches, with special-performance selection
criteria.
Niches are locations where it is possible to deviate from the rules in the
existing regime. Hence, the emergence of new paths has been described as a
‘process of mindful deviation’ (Garud and Karnøe, 2001), and niches
provide the locus for this process. This means that rules in technological
niches are not as articulated or clear-cut. There may be uncertainty about
technical design rules, user preferences or infrastructure requirements, etc.
Niches provide space to learn about these dimensions. Insights from the
sociology of technology and business studies are relevant here, e.g.
experimentation, learning on many dimensions, interactions between
multiple social groups, negotiations about meanings and interpretation.
Niches provide space to build the social networks that support innovations.
Product champions try to build constituencies around new innovations
(Molina, 1995), trying to expand the network of linkages in which these
innovations can function. Future visions and expectations are used as
resources to enrol other actors. These visions will be gradually refined
through experiences from learning processes. Learning, network building
and vision articulation are internal niche processes that have been analysed
and described under the label of strategic niche management (Kemp et al.,
1998; Kemp et al., 2001; Hoogma et al., 2002).
The macro-level is formed by the socio-technical landscape, which refers
to aspects of the wider exogenous environment, which affect socio-technical
development (e.g. globalisation, environmental problems, cultural changes).
The metaphor ‘landscape’ is used because of the literal connotation of
‘hardness’ and to include the material aspect of society, e.g. the material and
spatial arrangements of cities, factories, highways, and electricity
infrastructures. Landscapes form ‘gradients’ for action; they are beyond the
direct influence of actors in the regime, and cannot be changed at will. The
French historian Braudel (1958) coined the term ‘la longue durée’ for such
long-term structural backdrops of society. At this level, we can also refer to
long-wave theories that highlight long-term changes in the entire economy.
Economic growth and prices seem to follow long-waves of 50-60 year cycles
(Freeman and Perez, 1988).
The relationship among the three concepts can be understood as a nested
hierarchy, meaning that regimes are embedded within landscapes and niches
within regimes (see Figure 4). The work in niches is often geared to the
problems of existing regimes (hence the arrows in the figure). Actors support
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Chapter 9
the niche hoping that novelties will eventually be used in the regime or even
replace it. This is not easy, because the existing regime is entrenched in
many ways (e.g. institutionally, organisationally, economically, culturally).
Radical novelties may have a ‘mismatch’ with the existing regime (Freeman
and Perez, 1988), and do not easily break through. Nevertheless, niches are
crucial for system innovations, because they provide the seeds for change.
I will now describe how the three levels interact dynamically over time,
and how this interaction results in transitions and system innovations. The
dynamics will be described in four phases (see also Rotmans et al., 2001).
In the first phase, novelties emerge in niches in the context of problems
in the existing landscape and regime. Both technical form and ideas about
functionality are strongly shaped by the existing regime. There is not yet a
dominant design, and there may be various technical forms competing with
each other. Actors engage in experiments to work out the best design and
find out what users want. The SCOT-approach highlights socio-cognitive
processes and learning about meaning in social groups. Interpretative
flexibility diminishes as consensus emerges about the dominant meaning of
an artefact. LTS-approaches highlight product champions and system
builders who weave heterogeneous elements into a working system. ANT-
approaches emphasise how actors try to enrol each other to support
innovations. They also show how new technologies, markets, user
preferences and regulations shape each other as part of a translation and
linkage process.
Figure 4. Multiple levels as a nested hierarchy (Geels, 2002a)
Landscape
Patchwork
of regimes
Niches
(novelty)
I
ncreasing
structuration
o
f activities
i
n local practices
Multi-level Perspective on System Innovation
173
Chapter 9
In the second phase the novelty is used in small market niches that
provide resources for technical specialisation and exploration of new
functionalities. Gradually, a dedicated community of engineers and
producers emerges, directing their activities to the improvement of the new
technology. They meet at conferences and discuss problem agendas,
promising findings and search heuristics. Engineers gradually develop new
rules, and the new technology develops a technical trajectory of its own. The
new technology gradually improves as a result of learning processes. As
users interact with the new technology and incorporate it into their practices,
they build experience with it and gradually explore its new functionalities.
This second phase results in a stabilisation of rules, e.g. a dominant design
and articulation of user preferences.
The third phase is characterised by wide diffusion, breakthrough of new
technology and competition with the established regime. There are two
complementary explanations that can be used to explain the dynamics in this
phase: external circumstances and internal ‘drivers.’
External circumstances
The multi-level perspective highlights the point that breakthrough of
novelties from the niche-level depends on niche-external circumstances at
the regime and landscape level. Only if conditions in relating regimes and
landscapes are simultaneously favourable will wide diffusion of the novelty
occur. Such situations are called windows of opportunity. The following
circumstances are important for windows of opportunity to arise: (i) internal
technical problems in the regime, which cannot be met with the available
technology; (ii) problems external to the system, negative externalities;
(iii) stricter regulations, often in reaction to negative externalities; (iv)
changing user preferences, which may lead to new markets with which new
technologies may link; and (v) landscape changes that put pressure on the regime.
Internal ‘drivers’
Besides such external circumstances at the regime level, there are also
internal ‘drivers’ that stimulate diffusion of innovations. Disciplinary
perspectives highlight different aspects.
Economic: Improvements in cost/performance ratios stimulate wider
diffusion. The performance of the new technology may be improved, as
producers gain experience, e.g. learning by doing (Arrow, 1962). And
174
there may be ‘increasing returns to adoption’ as highlighted by economic
path dependence theorists
23
;
Socio-technical: In LTS- and ANT-approaches, the focus is on linkages
in and around the emerging technology, and the activities of different
actor-groups. The new configuration becomes more stable as more
elements are linked together (e.g. technology, user practices,
infrastructure, maintenance networks, regulations). The new system gains
‘momentum’ as more social groups have a vested interest in it;
23
Arthur (1988: 591) identified five sources of increasing returns to adoption: (i) learning by
using: the more a technology is used, the more is learned about it, the more it is improved;
(ii) network externalities: the more a technology is used by other users, the larger the
availability and variety of (related) products that come available and are adapted to the
product use; (iii) scale economies in production, allowing the price per unit to go down;
(iv) informational increasing returns: the more a technology is used, the more is known
among users; (v) technological interrelatedness: the more a technology is used, the more
complementary technologies are developed.
Figure 5. A dynamic multi-level perspective on system innovations (Geels, 2002b: 110)
TimeTime
Landscape developments
put pressure on regime,
which opens up on multiple
dimensions, creating windows
of opportunity for novelties
ST-regime is ‘dynamically stable’.
On different dimensions there
are ongoing processes.
New configuration breaks through, taking
advantage of ‘windows of opportunity’.
Adjustments occur in ST-regime.
Elements are gradually linked together,
and stabilise into a new ST-configuration
which is not (yet) dominant. Internal
momentum increases.
Articulation processes with novelties on multiple dimensions (e.g.
technology, user preferences, policies). Via co-construction different
elements are gradually linked together.
New ST-regime
influences landscape
Tec hnol ogi cal
niches
Landscape
developments
Socio-
technical
regime
Multi-level Perspective on System Innovation
175
Chapter 9
Sociological: In the sociological literature (as in some business studies)
the focus is on actors, organisations, groups and their perceptions, and
(strategic) activities. All kinds of social mechanisms may accelerate or
delay diffusion, e.g. hype and bandwagon effects, social struggles, effect
of outsiders and strategic games, and the ‘sailing ship effect.’
24
In sum, the breakthrough of radical innovations depends both on internal
drivers and niche-processes and on external developments in regimes and
landscapes. The key insight of the multi-level perspective is that system
innovations come about because developments at multiple levels link
together and reinforce each other (see Figure 5). This means that system
innovations are not caused by a change in a single factor or ‘driver,’ but are
the result of the interplay of many processes and actors.
As the new innovation enters mainstream markets it begins a competitive
relationship with the established regime. Economic considerations play an
important role by instituting comparisons with regard to price and
performance. From domestication and cultural studies, we know that the
wide adoption of new technologies requires efforts by users to domesticate
and integrate new technologies into their user practices. This may involve
symbolic work, practical work and cognitive work by the users. Changes in
user practices may lead to the articulation of new functionalities. Eventually,
a new regime is formed, and a period of relative stability sets in.
In the fourth phase the new technology replaces the old regime, which is
accompanied by changes in wider dimensions of the socio-technical regime.
This often happens in a gradual fashion, because the creation of a new socio-
technical regime takes time, viz. new infrastructures, new user practices, new
policies. Furthermore, incumbents tend to stick to old technologies because
of vested interests and sunk investments. They may also try to defend
themselves, e.g. by improving the existing technology (sailing ship effect),
political lobbying or evasion to other markets. The new regime may
eventually also influence wider landscape developments. An example is the
transition from sailing ships to steamships, which contributed to the
expansion of worldwide trade, as freight tariffs went down. The importing of
large quantities of cheap grain in Europe changed feeding patterns and raised
standards of living and health, but it also threatened the livelihood of
24
The sailing ship effect refers to the mechanism whereby actors associated with an
incumbent technology greatly increase their innovative efforts when the established
technology is challenged by a new technology. The term sailing ship effect was coined by
Ward (1967), who referred to improvements in sailing ships when steamships challenged
them in the 1860s and 1870s.
176
European farmers and led to the agricultural crisis of the 1890s. Steamships
also contributed to the mass immigration to America in the late 19th and
early 20th century. The transition to steamships thus contributed to many
wider social and economic transformations (see Geels, 2002b).
The description of the four phases shows that the MLP is able to
encompass insights from several disciplines. In Figure 6 I have
schematically positioned the different disciplinary building blocks from
Section 2 in the MLP, thus highlighting its integrative strength.
Empirical applications
The MLP has been empirically illustrated with historical case studies.
Geels (2002b) studies the transition from propeller-piston engine aircraft to
turbojets (1926-1975), the transition from sailing ships to steamships (1780-
1914), and the transition in urban land transportation from horse-and-
carriage to automobiles (1860-1930). Belz (2004) uses the MLP to study the
Figure 6. Positioning of different disciplines in the Multi-Level Perspective (Geels, 2004)
Emergence and stabilisation:
* socio-technical (ANT, LTS)
* sociological (SCOT)
* business studies
Diffusion:
* economic (cost/performance, increasing returns
to adoption)
* sociological (bandwagon effects)
* socio-technical (‘momentum’)
Regimes (Evolutionary Economics)
institutional theory
* Economic competition and substitution
* Domestication
Long wave theory
‘Impact’-studies
Multi-level Perspective on System Innovation
177
Chapter 9
ongoing transition in Switzerland (1970-2000) from industrialised
agriculture to organic farming and integrated production. Van Driel and
Schot (2001) use the perspective to study a transition in the transhipment of
grain in the port of Rotterdam (1880-1910), where elevators replaced manual
(un)loading of ships. Raven (2004) uses the perspective to study the niches
of manure digestion and co-combustion in the electricity regime.
4. POLICY SUGGESTIONS
System innovations are complex, uncertain and involve multiple social
groups. Hence policy makers puzzle over how they can influence system
innovations. The state is not an all-powerful and all-knowing actor in this
matter. Public authorities are only one social group amongst others. Like
other groups, they have limited power, a limited cognitive perspective and
limited resources to influence system dynamics. This recognition is
represented in a shift in policy studies from a focus on government to
governance (e.g. Kooiman, 1993; Kohler-Koch and Eising, 2000).
Governance means that there is directionality and coordination at the
systems level, but that it does not stem from one social group (e.g. policy
makers). Directionality and coordination thus have an emergent character,
arising from the interaction among groups. Public authorities may try to
influence this, but cannot steer it at will. This means one has to be modest
about the possibility for policy makers to steer system innovations. This is in
line with the MLP, which highlights the importance of ‘windows of
opportunity’ and the alignment of multiple developments. When existing
socio-technical regimes are stable, policy makers cannot simply ‘force’
major changes, but they can stimulate variety at the niche level and try to
modulate ongoing processes in the regime, aiming to make connections
between the two levels. Different policy instruments can be used for these
ends. The MLP does not so much propose new instruments, but suggests an
overall framework for a better alignment of existing instruments. Let us first
look at different instruments and then return to the MLP.
There is a wide range of policy instruments which stem from three
different governance paradigms: (i) the traditional top-down model, with a
central role for (national) government and hierarchical relations; (ii) a
bottom-up market model, with a large degree of autonomy for local actors;
(iii) a policy networks model, where actors are interdependent and have
diverging values and beliefs. These three governance paradigms have
different disciplinary backgrounds, focus on different aspects, encompass
different notions about the relationship between the government and other
actors, and propose different policy instruments (see Table 1). Formal rules
178
and regulations are instruments typical to the command-and-control
paradigm, while subsidies, taxes and (financial) incentives are common in
the market model. Within the policy network paradigm the conspicuous
leverages and instruments are learning processes, creation of shared visions,
experiments and interactive policymaking.
Table 1. Different policy paradigms (based on De Bruijn et al., 1993: 22)
Classic steering
paradigm (top-down,
command-and-control)
Market model
(bottom-up)
Policy networks
(processes and
networks)
Level of analysis Relationship between
principal and agent
Relationship
between principal
and local actors
Network of actors
Perspective Centralised, hierarchical
organisation
Local actors Interactions
between actors
Characterisation of
relationships
Hierarchical Autonomous Mutually
dependent
Characterisation of
interaction processes
Neutral implementation
of formulated goals
Self organisation on
the basis of
autonomous
decisions
Interaction
processes in which
information and
resources are
exchanged
Foundational
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)
Learning
processes, network
management
through seminars
and strategic
conferences,
experiments,
vision building at
scenario
workshops, public
debates
It is too simple to say that one paradigm is right and the others wrong.
They emphasise different aspects of a (complex) reality. I argue that
instruments from all three governance paradigms are needed to stimulate
system innovations rather than making a choice for one particular
instrument. I will use the MLP to formulate a general policy strategy to
stimulate system innovations, and situate instruments in different phases and
at different levels.
Multi-level Perspective on System Innovation
179
Chapter 9
According to the MLP, a general transition policy strategy must have two
characteristics. On the one hand, pressure on the existing regime should be
increased. This can be done with financial instruments (e.g. carbon tax) and
regulations (tradable emission rights, emission norms). On the other hand,
radical innovations should be stimulated to emerge in niches. This requires
more specific governance policies, e.g. subsidies for experimentation,
network management to enrol the right actors in the niche, and the
development of guiding visions and future expectations (e.g. Rotmans et al.,
2001; Hoogma et al., 2002). This does not mean that governments ‘pick the
winners,’ but that variety in innovation needs to be stimulated and guided.
This general strategy can be further refined. Different kinds of policies
are needed in different phases and at different levels. In the first two phases,
we need policies on the niche level to stimulate experimentation, learning,
network building and vision building. Instruments from the network
governance paradigm are relevant here. At the same time, regulative and
financial instruments are needed to put pressure on the regime. There is no
need to make this pressure very strong, unless the novelties have been
improved sufficiently in niches (stabilised design, substantial improvements
in price and performance). In the third and fourth phases, the system
innovation gains momentum and goals become clearer. Policies are needed
to push the new technology (e.g. regulations, adoption subsidies). Wide
diffusion also requires adjustments in the socio-technical regime (e.g. new
infrastructures, maintenance networks, regulations). Policies are needed for
adjustment and structural change. At the same time, impacts of the new
technology need to be monitored, and as more is learned about them, adjustment
of policies is needed. Figure 7 schematically represents how instruments from
different policy paradigms can be situated in different phases and levels.
The positioning of different policy instruments is ideal-typical and based
on theory. The importance and precise mix of instruments may vary between
domains and over time. Furthermore, countries may have different policy
cultures, preferring different instruments, e.g. the US may prefer market-
instruments, while the Netherlands chooses policy network instruments.
However, scientific understanding has not progressed far enough to make
robust conclusions about the ‘best’ mix of instruments in different domains,
times and countries.
But we can take one further step. Because effective policies depend on
windows of opportunity, it is helpful to identify some of those windows.
Small interventions at the right moment can have large impacts later on.
Here are some suggestions:
Identify not only appropriate initial niches to experiment with new
technologies, but also think in terms of trajectories of niche-accumulation.
What could be the subsequent niches and application domains for the
innovation?
180
Rather than focusing on single technologies as solutions, look for
interesting combinations of multiple technologies. The transition to
steamships occurred because three technical trajectories linked and
reinforced each other: screw propulsion (instead of paddle wheels), iron
hulls (instead of wood), and more efficient steam engines (compound
engines) which, in turn, depended on steel rather than iron;
Search for possibilities of technical add-on and hybridisation as stepping-
stones. Steam engines and paddle wheels were first used as auxiliary devices
on sailing ships. Gas turbines were first used as auxiliary supercharging
devices in piston-engine aircraft;
Take advantage of market dynamics. Novelties may break out of niches
by piggy-backing on the growth of particular market niches. If there is a
market trend towards a second car in households, policy makers can
oppose this dynamic to fight congestion. But they may also acknowledge
the trend and try to stimulate the use of Battery-Electric Vehicles (BEV)
in this market. This secondary market may then provide a stepping-stone
for the diffusion of radical technology;
Use new technologies to experiment with new functionalities and new
user patterns. If innovations can be used in new markets, they need not
Figure 7. Different transition policies in different phases (Geels, 2002b: 363)
TimeTime
Increase pressure on
regime using landscape
developments
(e.g. link up with cultural ideographs
or macro-problems)
Put pressure on regime
(e.g. regulations, taxes,
internalization of externalities)
* Technology-forcing (e.g. regulations)
* Adoption subsidies to make technology more
competitive
* Policies for adjustments and structural change
* Monitor impacts and adjust
* Experiment with alternative new technologies
*
* Articulate transition visions
* Learn from experiments and adapt visions
* Network management (e.g. introduce
outside actors)
* Look for interesting combinations between
multiple new technologies
Experiment with new functionalities and user practices
* Make transition visions more specific (e.g. strategic conferences)
* Increase popularity of technology (e.g. endorse in policy plans)
* interest and include more actors (bandwagon)
* R&D subsidies to stimulate technical development
* Contribute to creation of new
ST-regime (e.g. infrastructure,
maintenance)
* Monitor impacts
and adjust
Technological
niches
Landscape
developments
Socio-
technical
regime
Multi-level Perspective on System Innovation
181
fight with incumbent technologies head-on. This means that established
user patterns should not be taken for granted, but should be tested and
questioned;
Try to bring outsiders into the game. Incumbent actors may have too
many vested interests to nurture a radical innovation. An outsider may
speed up dynamics, and introduce new ways of doing and thinking.
5. TOPICS FOR FURTHER RESEARCH
The MLP provides an interesting overall perspective to understand
system innovations. It has some strengths and weaknesses with regard to
three scientific criteria: scope, empirical validity and simplicity (Ockham’s
razor). Strength of the MLP is its scope and generalizability. The perspective
is broadly encompassing and able to combine contributions from
sociological, economic and socio-technical theories. Another strength is that
the perspective can accommodate complex empirical reality, although I have
not been able to give detailed evidence of this point here (but see the
references). A weakness is the use of metaphors and rather imprecise
concepts (e.g. landscape, opening up, windows of opportunity). A problem
for academics who like to make computer models is the low degree of
simplicity. The perspective is fairly complex, requiring attention to dynamics
at multiple levels.
There are also several gaps that need to be filled in with further research.
One topic for further research is the elaboration of the multi-level
perspective in terms of transition routes, patterns and mechanisms. A second
topic is to look at the interaction among multiple niches. The MLP currently
suggests that system innovation is about the breakthrough of one niche but
there may be multiple niches accomplishing this. These niches can compete
with each other, but they may also reinforce each other or co-exist with little
interaction. This is an open and interesting topic.
A third topic is that closer cooperation should be sought with other
disciplines, e.g. innovation studies and business studies. The sectoral
systems of innovation approach, for instance, may have interesting insights
to offer (Breschi and Malerba, 1997; Malerba, 2002), and from business
studies we may learn more about the role of firms in different stages of
system innovations, e.g. the relationship between incumbent firms and
outsiders.
A fourth suggestion is to widen the empirical basis. More case studies
should be done of system innovations, chosen from different domains so that
the importance of different variables can be analysed (e.g. with or without
infrastructure; private versus public sector; sectors with few large firms
182
Chapter 9
versus many small firms; internal problems versus negative externalities).
When historical case studies are done, attention should be paid to the issue
of the applicability of received insights to present-day contexts.
A fifth topic is the definition of boundaries. This is relevant for all
research dealing with systems. More work should be done on this issue,
because it is important to have the unit of analysis clear. On the other hand,
perhaps we should not over-emphasise this issue. Particularly with regard to
social networks, it is simply not possible to define boundaries once and for
all. Social groups and the networks among them are the outcome of
historical differentiation processes. The network of social groups, and
associated socio-technical systems, develops over time. Relationships
between social groups shift and new groups emerge. In the electricity sector,
for instance, liberalisation has given electricity distribution companies a
more prominent role, and electricity traders in spot markets have emerged as
an entirely new group. Another point is that the specific network of social
groups shows great differences between sectors. The social networks in
transport systems look and function differently than in electricity systems.
Questions about boundary definition always occur in systems and networks,
but this is more an empirical issue than a theoretical one.
A sixth topic is the relationship between different policy paradigms.
More should be done to determine how different instruments should be used
in different phases. Historical case studies may act as an interesting mirror,
but more attention also needs to be paid to differences between domains,
times and countries. More international comparative work is required as
system transformations become an increasing concern globally.
ACKNOWLEDGEMENTS
I want to thank Ruud Smits, Xander Olsthoorn, Anna Wieczorek and two
anonymous referees for their useful comments on earlier versions of this
chapter.
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In the last few decades, substitute modes of debate analysis in construction projects have experienced considerable concern from researchers and practitioners because of the industry fixes on productive dispute resolution methods. Nevertheless, the subject of individuals addressing managers to settle conflicts rests a resolution of interest. It is an opportunity to incorporate the collected experience in the research to script a course for the industry approaching overcoming contracts to resolve disputes. A systematic review of the literature remarked that the dynamics that influenced companies to resort to contracts lacked critical focus because of the inadequate analysis recognized in the construction context. It was perceived from the research reflection that while the bodies and behavioral circumstances have an imperative impact on the contracts management of organizations, an inadequately planned contract exhibits importance that can develop such practice in frames that may complete in case. On the contrary, a well-drafted contract may be significant but not satisfactory to develop a peaceable interpretation of conflicts among the contractors to the agreement. This research delivers knowledge on the significance of managing the bodies and their practice to execute construction projects less prone to demand through a literature review.
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Technological change is a central feature of modern societies and a powerful source for social change. There is an urgent task to direct these new technologies towards sustainability, but society lacks perspectives, instruments and policies to accomplish this. There is no blueprint for a sustainable future, and it is necessary to experiment with alternative paths that seem promising. Various new transport technologies promise to bring sustainability benefits. But as this book shows, important lessons are often overlooked because the experiments are not designed to challenge the basic assumptions about established patterns of transport choices. Learning how to organise the process of innovation implementation is essential if the maximum impact is to be achieved - it is here that strategic niche management offers new perspectives. The book uses a series of eight recent experiments with electric vehicles, carsharing schemes, bicycle pools and fleet management to illustrate the means by which technological change must be closely linked to social change if successful implementation is to take place. The basic divide between proponents of technological fixes and those in favour of behavioural change needs to be bridged, perhaps indicating a third way. © 2002 Remco Hoogma, René Kemp, Johan Schot and Bernhard Truffer.
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Actors, Social Action, and Systems - PART ONE: SOCIAL RULE SYSTEM THEORY Social Rule System Theory The Organization of Social Action and Social Forms Actors, Rule Systems, and Social Structure Rule Systems, Organization of Society, and Social Power Consensus and Conflict in Social Life Grammers of Social Institutions and the Structuring of Spheres of Social Action The Structuration of Markets and Other Distributional Regimes - PART TWO: MARKETS AND COLLECTIVE BARGAINING SYSTEMS Market Organization and Performance Properties Collective Bargaining Regimes and Their Transformation Multiple Rule Systems Formal and Informal Social Organization - PART THREE: BUREAUCRACY AND FORMAL ORGANIZATIONS Local Public Administration as an Arena of Conflicting Rule Systems Hydro-Power Administration in a Changing World Industrialism, Environmentalism, and Center-Periphery Struggle in Norway Technology and Technique, Social Action, and Rule Systems - PART FOUR: EXPERTISE, TECHNOLOGY AND SOCIAL ORGANIZATION A Modern Oracle and Politics Studies in Energy Forecasting Science and Practical Action The Study of Competing Logics Conclusion Principles of Social Organization in the Structuration of Modern Western Societies