Review of System Innovation and Transitions Theories Concepts and frameworks for understanding and enabling transitions to a low carbon built environment

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Review of System Innovation
and Transitions Theories
Concepts and frameworks for understanding and enabling
transitions to a low carbon built environment
Paul Twomey & A. Idil Gaziulusoy

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Executive Summary
• This report reviews the literature on innovation and transition
theory with a view to gaining a greater understanding of the
nature of innovation processes, particularly those involving
disruptive change and systems transformation. The report has
been commissioned by the Visions and Pathways 2040 project
for the CRC for Low Carbon Living. A key aim of the review
is to supply insights and frameworks to assist the visioning,
pathway analysis and policy work of the project.
• There are a number of variations in the use of the term
“innovation”. These variations depend on, for example, where
the innovation is located in the value chain (e.g. product,
process or organisational innovation), the novelty of the
knowledge underlying the innovation, or the extent of the
economic /market impact of the innovation. Confusingly,
the idea of “incremental” versus “radical” innovation is often
applied to both the second and the third of these situations.
The move to a low carbon urban future will most likely not rely
on one or even a small number of technological innovations,
but is likely to arise from a constellation of interacting systems
of innovations, some involving radical knowledge-based
innovation and some involving incremental and “recombinative”
innovations. Another term commonly used interchangeably with
systems innovation is “transition”.
• The theory of innovations and transitions is not based on any
single discipline or school of thought. Rather, the concepts
and insights draw upon a broad range of disciplines and
practicesgoingbacktothersthalfofthe20th century. Early
economic theories viewed the innovation process as a relatively
simple, one-directional process from invention to commercial
development to diffusion into the market place. A consequence
of this linear model was a strong prioritisation of either supply–
push factors such as research and development (R&D) or
demand–pull factors such as relative prices as the drivers of
innovation.
• Modern thinking on innovation has a more nuanced and richer
picture, with a wider set of implications for those hoping to
assist, shape or direct the innovation process and system
change. Key ideas include appreciating the importance of actor
networks; the role of institutions; the co-evolutionary nature of
the technologies, institutions, social practices and business
strategies; the role of feedback and path dependency in socio-
economic systems; and a greater understanding of the different
types of knowledge and learning processes.
• Technological innovation systems (TIS) theory is a useful
heuristic framework that uses many of these concepts for
analysing the success or failure of a technology on the basis
of the performance of the surrounding technological system.
It includes identifying the key structural elements of a TIS (e.g.
actors, institutions, interactions and infrastructures) and key
functions of a TIS (e.g. entrepreneurial activity, knowledge
development and diffusion, market formation, expectations
and goal formation, resource mobilisation and the formation of
advocacy coalitions).
• The multi-level perspective (MLP) is another heuristic
framework, which takes a broader approach than TIS theory
by looking at transformative societal processes. These may
include a variety of innovations. It is part of the socio-technical
transitions theory pioneered by Dutch researchers. The MLP
posits three levels to aid understanding transitions: a landscape
(macro) level that encompasses the dynamics of deep cultural,
economic and political patterns; a regime (meso) level that
refers to the current practices, routines and dominant rules
that prevail in a socio-technical system; and a niche (micro)
level which represents the space where actors experiment with
radical innovations that may challenge and break through into
the prevailing regime.
• These concepts and frameworks have been used to support
the formation of innovation and transitions policies. By focusing
on systems and the dynamics and drivers of change, they
allow for a perspective on fostering innovation that goes
beyond mere diagnosis of “externality” market failures, which
is the main basis of innovation policy grounded in neoclassical
economics. The TIS policy approach involves monitoring the
key structures and functions of a technological system to see
whether weaknesses exist in the system and to pinpoint where
improvements could be made. Strategic niche management
(SNM) and transition management (TM) have evolved as
policy-centric frameworks in the Dutch socio-technical
transitions tradition and also use MLP. Their advice includes
paying attention to the role of visions, the development of actor
networks, facilitating learning, creation of nurturing spaces
for niche innovations, and strategies for up-scaling niche
innovations.

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Table of Contents
1. Introduction
2.Incremental,radicalandsystemsinnovation
3. Selected key insights from modern innovation and transition theory
3.1. Multiple actors and networks
3.2.Interactivity,feedbackandcomplexity
3.3. Institutions and culture
3.4. (Co-)evolutionary
3.5. Path-dependency and lock-in
3.6. Uncertainty
3.7. Knowledge and learning
4. Frameworks of systems innovation and transition
4.1 Innovation systems
4.2Socio-technicaltransitiontheory
5. Policy and strategy implications
5.1 Technological innovation systems policy implications
5.2Strategicnichemanagement
5.3 Transitions management
6. Conclusion
Paul Twomey & A. Idil Gaziulusoy
WorkingpaperfortheVisions&Pathwaysproject,March2014
Research funded by the CRC for Low Carbon Living
Copy editor: Jonathan Shaw
Report design: Jessica Bird
Coverimagecredit:©AngelicaRojasGracia,2011.

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1. Introduction
As cities and urban lifestyles account for three quarters of global
energy demand and greenhouse gas emissions, it is generally
agreed that they will play a crucial role in any attempt to reduce
energy use and greenhouse gas emissions to the extent that
scientistssayisrequired(Bicknelletal2009;UNEP2011;
Newton2011).However,thereislessagreementastowhether
such reductions can be achieved by means of incremental
improvementsinefciencyandwastereduction(bymeans,for
example, of technical improvements to products and processes)
that keep our lifestyles and physical and social infrastructures
relatively unchanged. Increasingly, the view is that a radical and
transformative restructuring is needed of our most fundamental
systemsforurbanliving(Ryan2013).
Radical systems innovations or transitions involve “innovations
that are directed to redesigning entire systems of practices
and provisions, instead of individual products or processes”
(Sterrenbergetal2013:9).Theseincludethedomainsof
housing, mobility, food, community practices, city infrastructures
and urban form. Widening the boundaries to include entire
systems makes possible gains in sustainability that are potentially
much greater than those from single product or process
innovations, which are the focus of traditional eco-design or end-
of-pipe innovations.
This report reviews the literature on innovation and transition
theory with a view to gaining a greater understanding of the
nature of innovation processes, particularly those involving
disruptive change and systems transformation. The report has
been commissioned by the Visions and Pathways 2040 project
for the CRC for Low Carbon Living. A key aim of the review is to
supply insights and frameworks to assist the visioning, pathway
analysis and policy work of the project.
The literature on innovation and transitions is enormous and this
review will only cover key concepts and frameworks that are
particularly relevant in the area of sustainability. As mentioned
already, a particular focus is on system changes (macro- and
meso-level).However,giventhatsystemchangesusuallyinvolve
a constellation of lower-level innovations, and indeed are often
initiated by the emergence of niche innovations, we will also be
covering some key understandings of the micro-level.
The literature we draw upon may be described as innovation
theory,systemsinnovationtheoryandtransitiontheory.However,
this does not imply that the concepts and frameworks for
understanding disruptive change are contained in a single
discipline or school of thought. Rather, the insights presented
here draw upon a broad range of disciplines.
Asignicantfeatureofthedevelopmentofmoderninnovation
thinking, particularly in the area of sustainability, has been a
gradual broadening of the scope of both problem framing and
analyticalframing(Smithetal2010).Thatis,rst,theobject
ofinnovationhasbeenextendedfromthe1980sfocuson
cleaner technologies towards interest in the entire system of
production and consumption. Second, the analytical frames
and considerations that have been used to study innovation
processes have been enlarged from a focus on the role of
the inventor (supply side) or price signals inducing innovation
(demand side) to include a much broader set of systemic issues
that may propel or impede the development of an innovation or
set of innovations (including the role of networking and coalition
building, mechanisms of knowledge diffusion, processes of
legitimation and social acceptance, and so on).
Photo:GlenScarboroughviaFlickrCCBY-NC-SA2.0

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Inthisreviewwerstlookatanumberofkeyideasand
concepts that have emerged in innovation thinking over the
last half-century, and then examine two prominent frameworks
for understanding innovation, particularly system change. The
Innovation Systems approach, particularly the Technological
Innovation Systemsversion,isaninuentialanalyticalframework
thatemergedinthe1990sforidentifyingthestructureand
functions of innovation systems and has been applied in a
number of areas. The Socio-Technical Transition approach,
particularly the Multi-Level Perspective, is a framework that
developed out of historical studies of transitions in areas
such as energy and transport, and is particularly powerful in
understanding the complex interplay of different forces at the
macro-, meso- and micro-level in creating disruptive change.
The literature does not provide consensus on the best approach,
and each of the frameworks discussed here has its critics.
However,wehopetogivethegeneralreaderwhoisunfamiliar
withinnovationandtransitiontheoryaavourofthecomplex
web of elements and issues involved in understanding innovation
and systems change. This includes dispelling the myth that
transformative change will be driven exclusively by scientists and
engineers. Rather, the perspective adopted here argues that any
potential disruptive system change will likely be the outcome
of a large set of multiple actors (public and private) interacting
on multiple levels and operating under a web of multiple
technological, economic and social dynamics.
These theories have been applied across a large number of
industries and technologies, some of which have been related
tosustainabilityissuesbutlessinspecicapplicationtothebuilt
environment. Side boxes throughout this report present examples
of the application of concepts and frameworks to cities and
sustainable urban living. Given the multi-modal complexity and
scale of a city, the applicability of some of these frameworks to
citiesisstillupfordebate(e.g.NaessandVogel2012)andan
important ongoing research goal of the Visions and Pathways
2040 project is to determine the strengths and weaknesses of
these frameworks in relation to urban settings.
Section2ofthisreportprovidesafewclarifyingcommentsonthe
somewhat confusing terminology relating to the different types
of innovations referred to in the literature. Section 3 presents
a number of key concepts and insight that have emerged in
innovation thinking over the last half century. Section 4 examines
twospecicframeworksthatincorporatetheseideasinto
systems approaches for understanding innovation and transition.
Some of the potential policy implications that emerge from these
frameworks are presented in section 5. Section 6 concludes the
report.

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2.Incremental,radicalandsystemsinnovation
The literature on innovation contains many categorisations of
innovation along many different dimensions. One survey by
GarciaandCalantone(2002)found15differentconstructs
forcategorisinginnovationfromonly21studies.Thereislittle
consensus on the correct use of such terminology, with many
terms having strongly overlapping meanings while the same term
is often used in different ways. Typical distinctions one encounters
in the literature are incremental vs. radical innovation (Dewar
andDutton,1986),evolutionary vs. revolutionary innovation
(TushmanandO’Reilly1996),sustaining vs. disruptive innovation
(Christensen1997),andproduct vs. process vs. organisational
innovation(OECD,1997).Sometypologiesareorientated
towardsarmormanagerialperspectivewhereasothersare
orientated towards more macroeconomic or systems research
perspective.
Two of the most common terms – incremental and radical
innovation – are often distinguished using one or both of the
followingcriteria(Bell201226):
1. The novelty of the knowledge base underlying the innovaon.
Herewecanthinkofa“radical”innovationasinvolvinga
considerable discontinuity in the knowledge base underlying
the technical system (whether the product, production process,
administration, etc). Whereas incremental innovations have a
greater continuity in the type of knowledge employed.
2. The scale and signicance of the economic (and other)
consequences of the innovaon. The idea here is that the impacts
and effects of radical innovation are much greater and probably
more “disruptive” than those of incremental innovations.
Unfortunately for the purposes of terminological clarity, as Bell
(2009)hasnoted,differencesbetweeninnovationsintermsof
their market or economic impact does not always align well with
theirtechnologicalnovelty.Christensen(1997),forexample,in
his case study research on the computer disk drive industry,
foundthatmanyoftheinnovationthatledtosignicantnew
markets and overturned existing markets or value networks
(what Christensen terms “disruptive innovation”) were not always
”radical” in the sense of a novel discontinuity in the underlying
knowledge base; rather, they often amounted to repackaging
off-the-shelf components so as to create a new value proposition
to customers. The implication for low carbon pathways, which
is concerned with end-result impacts on emissions, is that we
do not necessarily have to rely on “radical” innovation in the
sense of an abrupt discontinuity in the underlying knowledge of
therelevantsystem.Ryan(2004)coinedtheterm“recombinant
innovation” to capture the idea that the next (sustainable)
industrialrevolutionmaybelocatedsignicantlywithinthe
progressive and cumulative transformation of existing systems
of production and consumption to make them more resource
efcientandlesspolluting.
As alluded to in the introduction, the transition to a low carbon
urban future will most likely not depend on one or even a small
number of technological innovations, but is likely to arise from
a constellation of mutually interacting systems of innovations.
In moving from a single innovation, to a cluster, to a system of
innovation, perhaps the most well known taxonomy is the one
developedbyFreemanandPerez(1988)basedonempirical
researchconductedattheinuentialScienceandTechnology
Policy Research Unit (SPRU) at the University of Sussex, UK.
Table 1 (see next page) presents their four level taxonomy of
innovation.

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Type of innovation Description
Incremental innovations Innovations that occur continuously, that are not the result of deliberate
R&D, but outcomes of inventions and improvements suggested by the
production people or proposals by users (“learning-by-doing” and “learning-
by-using”).
Radical innovations Discontinuous events, usually as a result of deliberate R&D in an enterprise
or university. They lead to growth of new markets and investments, but are
relatively small in aggregate economic impact
Changes of technology systems These are far reaching changes in technology, affecting several branches of
the economy, as well as giving rise to entirely new sectors. They are based
on a combination of radical and incremental innovations affecting more than
oneorafewrms.
Changes in “techno-economic paradigm
(“technological revolutions”)
Amajorinuenceonthebehaviouroftheentireeconomy(“pervasive
effects”). Created through many clusters of radical and incremental
innovations. Not only create a new range of products, services, systems and
industries, but also affect almost all the other branches of the economy. The
changesinvolvedgobeyondengineeringtrajectoriesforspecicproductor
process technologies and affect the input cost structure and conditions of
production and distribution throughout the system.
Table 1. Freeman and Perez (1988) Taxonomy of innovations
of the last two categories of Freeman and Perez’s typology.
In most cases, the term covers not only product and process
innovations but also changes in user practices, markets, policy,
regulations, culture, infrastructure, lifestyle and management of
rms(see,forexample,Berkhout2002;Kemp&Rotmans2005;
Geels2006).Anothercommonterm,“transition”,isoftenused
interchangeably with the term “systems innovation”, either at the
technology system or society-wide level. Kemp and Rotmans
(2005),however,arguethat“Forthepurposesofmanaging
change processes to sustainability it is useful to use the concept
of a ‘transition’ rather than system innovation” since it brings
into focus the new state, the path towards the end state, the
transition problems and the wide range of internal and external
developments which shape the outcome (36). Also note that
sometimes the term “transitions theory” is used to refer to
“transition management”; the latter is usually associated with a
specicresearchstreamintheEU(mainlyintheNetherlands).
However,inthisreportwewillcontinuetoattachamoregeneric
interpretation to the term “transition theory”.
A feature of the last two categories, which involve clusters or
aggregation of innovations, is that they rely on both incremental
and radical innovation. It is therefore a mistake to underestimate
the importance of cumulative, incremental innovation in our
understanding of major transformative change. Indeed, the
benetsofmanyradicalinnovations–includingtheautomobile
and airplane – have only been recognised through a series of
supportingincrementalimprovements(Geels2005;Dolata2011).
Another commonly used term in the literature is “system
innovation”. Depending on the writer, this can refer to either
Photo by See-ming Lee via Flickr CC-BY

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3. Selected key insights from modern
innovation and transition theory
Schumpeter(1934,1942)isoftenidentiedasthersttofeature
innovation as a central driver of the economy and to reject
neoclassicaleconomics’ideaofastaticequilibrium.Hisidea
that the process of innovation “incessantly revolutionises the
economic structure from within, incessantly destroying the old
one,incessantlycreatinganewone”(Schumpeter1942:83)
continuestobeinuentialtothisday.However,Schumpeter
and his followers employed a rather simple, one-directional
perspective of the innovation processes. The so-called ”linear
model” of innovation begins with an invention (perhaps from
ascienticdiscovery),isdevelopedintoacommerciallyviable
technologyinarm,andisthendiffusedintothemarketplace.A
consequence of this model was a strong prioritisation of research
and development (R&D) and the entrepreneur as the driver of
innovation. This is sometimes referred to as the technology- or
supply-push perspective of innovation. An alternative perspective
putforwardinthe1950sand60s,butstillwithinthelinearmodel
approach, was that demand for products and services is more
important in stimulating innovation activity and is known as
thedemand-pullperspective(Schmookler1966).Theideaof
introducing carbon pricing, with its subsequent effect on relative
prices, as a means of bringing cleaner technologies and products
to the market, follows this logic.
Overthelastftyyears,amorenuancedandricherpictureofthe
innovation process has emerged, with a wider set of implications
for those hoping to assist, shape or direct it. In the following sub-
sections we review a selection of key insights that have emerged
over this period and look at two approaches that incorporate
many of these ideas into a heuristic framework for understanding
system innovations and transitions.
3.1 Multiple actors and networks
Modern innovation theory has moved towards the recognition
that innovation is a joint activity involving a large number of
actors with different interests, perceptions, capabilities and
roles. In particular, it removes the prejudice that the economy is
entirely made of entrepreneurs. In particular, the technological
innovation systems approach (see below) pays much attention
to understanding the structure and networks of actors. The
heterogeneity of actors, including differences in risk averseness,
perceptions of the economic environment and imperfect abilities
to imitate the innovations of others, also provides a theoretical
underpinning for explaining why there is any innovation at all
(which is less easily explainable under neoclassical assumptions).
A particularly interesting development is the growing recognition
oftheimportanceofusers(rmsandindividualconsumers)in
the innovation process. It is not just that product and service
developers are more sensitive to the wants and needs of users,
but rather that users are increasingly developing or adapting their
own goods and services, sometimes aided by the availability
of improvements in computer and communication technology
(Bogersetal2010;vonHippel2005).Thishasledinmanyareas
to thriving user innovation communities and rich intellectual
commons, which also feed back to manufacturers to mass
produce new products and services. Product innovation by users
hasbeenshowntobeespeciallyprolicintheeldofsporting
devicessuchaskiteboarding(Frankeetal2006)andmountain-
biking(Liithjeetal2005)aswellasjuvenileproducts(Shahand
Tripsas2007)andmusicdevicesandsoftware(Faulknerand
Runde2009).
In the context of the Visions and Pathways 2040 project, having
a wide set of participants has been deemed central to the
potential success of the project. Participants in the project are to
include industry (property developers, materials suppliers, energy
specialists, architects, planning, urban design and engineering
service companies and built environment related peak bodies),
state and federal governments, city councils, universities from
Australia and Europe, public utilities, planning agencies, the
national standards organisation, TAFE and CSIRO.
3.2 Interactivity, feedback and complexity
Compared to the linear model, an important feature of the
modern approach to innovation is the interactivity among agents
and feedbacks between different stages of the innovation
processes(KlineandRosenberg1986).Liketheprevioustheme,
thisresonatesstronglywiththeeldofcomplexitysciencewhich
investigates how relationships between parts give rise to the
collective behaviours of a system, and emphasises non-linear
dynamics, heterogeneous agents, networks, evolution and the
emergenceofsystemproperties(Mitchell2011).
The idea of the economy as a complex adaptive system has been
developedintoso-called“complexityeconomics”(Arthur1999)
and complexity system tools such as agent based modelling
are increasingly being applied to economics. Such tools may be
particularly useful in modelling discontinuous, disruptive systems
change (versus the marginal, incremental approach usually
implicit in neoclassical economics). The complexity of interaction
and interdependence also occurs between (as well as within)
systemsand,asFoxonetal(2013)note,thisishighlyrelevant
to analysing sustainability issues in which there are complex
interactions between economic, social and ecological systems.

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3.3 Institutions and culture
Whereas neo-classical economics has a minimal understanding
of institutions, evolutionary economics and modern innovation
theory give institutions a central role in enabling, constraining and
shaping our behaviours and practices. Indeed, it may be argued
that many of the limitations of neoclassical economics result from
considering interaction of rational agents with no meaningful
analysis of the institutional environment in which business and
policydecisionsaretaken(Foxonetal2013).Theatomistic
nature of this model also under-appreciates the role of culture –
the ideas, customs, and social behaviour of a particular people
or society – which belies the idea that people are born with
given “preference functions” or behavioural practices that are not
historical and culturally contingent and open to change (Ormerod
1998).
Institutions are sometimes divided into hard and soft institutions.
Hardinstitutionsareexplicitandcodiedandincludelaws,rules,
regulations and instructions. Soft institutions include customs,
habits, routines, established practices, traditions, ways of
conduct, norms and expectations. In the context of the Visions
and Pathways 2040 project, identifying both the hard and
soft institutions that underlie our urban systems will be crucial,
particularly in conducting the pathway analysis of how to enable
change.
3.4 (Co-)evolutionary
A co-evolutionary approach to innovation is an overarching
theme in modern innovation theory. Co-evolution occurs when
different sub-systems have mutual interactions which affect the
development of each system. In particular, analysing transition
pathways calls for a co-evolutionary understanding of the
development of technologies, institutions, social practices and
businessstrategies(Geels2005;Foxon2008,seegure3).The
co-evolutionary understanding is an attempt to overcome the
dichotomy between the two dominant approaches advocated
to achieve sustainability – technology-oriented versus behaviour-
orientedapproaches(Brand2003).
Sartorius(2006)statesthat“co-evolutionimpliesthatsuccessful
innovation in general and successful sustainable innovation in
particular, has to acknowledge the involvement of, and mutual
interaction between, more than the mere technical and economic
spheres”(274).Therefore,tounderstandthedynamicsof
technological change so as to plan for and develop sustainable
technologies, particularly in a complex sphere such as urban
living, a co-evolutionary approach which acknowledges the
interaction between all components of socio-technical system is
essential(Gaziulusoy2010).
Figure 1. Co-evolution of technologies, business strategies,
institutions and user practices (Foxon 2010)

9
Box 1: Automobile dependence and urban
form lock-in
In urban studies, the concept of automobile dependence is a
well known path-dependence phenomenon where institutions
and structures (e.g. car based suburban shopping malls,
dispersed locations of new urban developments) encourage,
reinforce and entrench high levels of private motor vehicle use
and low usage of alternative modes of transport (Newman and
Kenworthy1999).
IntheaftermathofWorldWar2,whenAustraliaexperienced
signicantpopulationandeconomicgrowth,combinedwith
cheap fuel and increasing car affordability, many Australian
cities rapidly transformed from modest, medium density
centres supported by public transport to suburban, car-
dominated cities with large residential suburbs with relatively
poor public transport infrastructure. Along with the increasingly
dispersed population came a correspondingly higher carbon
footprint. Given that so many of our structures and practices
are now embedded in a car dominant culture, the task of
urban planners to slow, let alone reverse, this path dependency
momentum is a daunting one.
3.5 Path-dependency and lock-in
Technologicalchangetendstoproceedincrementallyalongxed
paths due to the risk reducing behaviour of companies. This
phenomenon is known as path dependency of innovation (Arthur
1989).Pathdependencycreatestechnologicallock-in,whichact
asabarrieragainstdisruptiveinnovation(Nelson&Winter1982).
Co-evolutionary and feedback processes also point to how path
dependencies can arise in the trajectories of socio-technological
systems. In the context of sustainability, it explains the presence
of the carbon “lock-in” of our energy systems, in which a
centralised, fossil-fuel based system has arisen through the co-
evolution of technological, institutional and user practices, and
hascreatedsignicantbarriersforthediffusionofdecentralised
andrenewablebasedsystems(Unruh2000).Anotherexampleis
the case of automobile dependence and development of urban
form (see Box 1).
3.6 Uncertainty
Implicit in a number of the above considerations is the presence
of uncertainty, particularly fundamental or intrinsic uncertainty.
Fundamental uncertainty refers to situations that are not – or
cannot – be known in advance, because they are outside existing
conceptual models. In some characterisations, fundamental
uncertainty is due not so much to the limits of imagination as
to the possibility of creativity and non-predetermined structural
change, making prediction inherently impossible. Thus, a full list
of possible outcomes is not predetermined or knowable ex ante,
asthefutureisyettobedetermined(Dequetsh2008).
One particularly important implication of the uncertain nature of
innovationisthatrms’andinvestors’expectations of future
markets,technologiesandpoliciesareacrucialinuenceontheir
decisions about which technologies to invest in and develop.
Expectations are often implicitly or explicitly shared among
differentrmsinthesameindustry,givingrisetotrajectories
oftechnologicaldevelopmentwhichresembleself-fullling
prophecies(Dosi1982).OneofthegoalsoftheVisions and
Pathways 2040 project is to co-create new shared futures that
becomeself-fullling.
3.7 Knowledge and learning
Knowledge is often claimed to be the most fundamental resource
in an innovation system, while learning is the most important
process(Lundvall2007;Wieczorek2012).Asinnovationtheory
has developed, the understanding of different kinds and forms
of knowledge (e.g. tacit as opposed to explicit knowledge) and
learning(e.g.learning-by-doing,Arrow1962;learning-by-using,
Rosenberg1982;learning-by-interacting,Lundvall1988;single
loopanddoublelooplearning,ArgyrisandSchon1978)have
expanded our insights into the development and diffusion of
innovations.
PhotobySimonForsythviaFlickrCCBY-NC-SA2.0

10
4. Frameworks of systems innovation and transition
In this section we examine two complementary bodies of
literature that provide frameworks for analysing radical innovation
and system innovations: the innovation systems approach
and the socio-technical transitions approach. Although these
perspectives have developed to some extent independently, there
has been cross fertilisation of ideas and they largely share most
of the innovation concepts and insights of the previous section.
Furthermore, there have been recent efforts towards integrating
theseperspectives(MarkardandTruffer2008;MeelenandFarla
2013).
There are other relevant frameworks that we will not discuss here,
partly because of space considerations but also because they
have many overlapping characteristics with the two frameworks
examined here. These include macro theories such as long wave
theory on techno-economic paradigm shifts (Freeman and Perez
1988)andtechnologicaldiscontinuity(AndersonandTushman
1990),aswellasmoreorganisationalfocusedtheoriessuchas
disruptiveinnovationtheory(Christensen1997).
4.1 Innovation systems
Innovation systems (IS) theory is a heuristic framework that starts
fromthebasisthatitisnotentrepreneursorrmsalonethat
innovate. Rather, innovation occurs in the context of an entire
system. In particular, a core tenet is that technologies, actors and
institutions co-determine each other and need to be analysed
conjointly. The innovation systems approach has been applied
atnational(Freeman1995),regional(CookeandUranga1997),
sectoral(Malerba2002)andtechnologicallevels(Bergeketal
2008).Itisonthislast,technologicalinnovationsystems(TIS),
that we will focus on here.
ATIShasbeendenedas“adynamicnetworkofagents
interactinginaspeciceconomic/industrialareaunder
a particular institutional infrastructure and involved in the
generation, diffusion and utilisation of a technology” (Carlsson
andStankiewicz1991:111).TheTISapproachusuallystartswith
aspecictechnologyandseekstounderstanditssuccessor
failure on the basis of the performance of the TIS. The detection
and investigation of so-called system failures (a concept more
encompassing than the idea of market failure in neoclassical
economics) and the creation of appropriately targeted policy
responses is a major theme of this approach.
The early literature focused on identifying the structure of a TIS.
Table2showsaclassicatorysystemdevelopedbyWieczorek
andHekkert(2011)basedonfourkeystructuraldimensions:
actors, institutions, interactions and infrastructure. An analysis
of structures typically yields insight into systemic features –
complementaritiesandconicts–thatconstitutedriversand
barriers for technology diffusion at a certain moment or within a
given period.
Structural Dimensions Subcategories
Actors: • Civil society
• Companies:start-ups,SMEs,largerms,multinationalcompanies
• Knowledge institutes: universities, technology institutes, research centres, schools
• Government
• NGOs
• Otherparties:legalorganisations,nancialorganisations/banks,intermediaries,knowledge
brokers, consultants
Institutions: • Hard:rules,laws,regulations,instructions
• Soft: customs, common habits, routines, established practices, traditions, ways of conduct,
norms, expectations
Interactions: • At level of networks
• At level of individual contacts
Infrastructures: • Physical: artefacts, instruments, machines, roads, buildings, networks, bridges, harbours
• Knowledge: knowledge, expertise, know-how, strategic information
• Financial:subsidies,nancialprograms,grantsetc.
Table 2. Structural dimensions of Technological Innovations Systems (Wieczorek and Hekkert 2011)

11
System Function Description Typical events
F1. Entrepreneurial activities The existence of risk taking
entrepreneurs is essential as they
translate knowledge into business
opportunities by performing
commercial experiments.
Commercial projects, demonstrations,
portfolio expansions.
F2. Knowledge development R&D and knowledge development
mostly on emerging technology, but
also on markets, networks, users etc.
Studies, laboratory trials, pilots,
prototypes developed.
F3. Knowledge diffusion /
knowledge exchange
Using networks and other interactions
to facilitate the exchange of knowledge
between all the actors involved in the
TIS.
Conferences, workshops, alliances
between actors, joint ventures, setting
of platforms or branch organisations.
F4. Guidance of the search Activities within the TIS that shape the
needs, requirements and expectations
of actors with respect to their (further)
support of the emerging innovation.
Expectations, promises, policy targets,
standards, research outcomes.
F5. Market formation Activities that contribute to the
creation of a demand for the emerging
technology.
Regulations supporting niche markets,
generic tax exemptions, “obligatory
use”.
F6. Resource mobilisation Facilitatingaccesstonancial,material
and human capital.
Subsidies, investments, infrastructure
developments.
F7. Support from advocacy
coalitions
Forming advocacy coalitions to
counteract institutional inertia by
urging authorities to reorganise the
congurationofthesystem.
Lobbies, opinion pieces, advice.
In general, the TIS has been used as a heuristic tool for analysing
nascent innovations at an industry level and focuses attention on
the arrangement of structures and activities. In section 5 we will
examine more closely the policy applications of this approach.
However,whiletheTISframeworkhasbeenappliedinanumber
of technology case studies, the approach has not been without
criticism(Smithetal2010;Geels,2006,2011).Lachman(2013)
has summarised some of the main criticisms:
• Though co-evolutionary in nature, the TIS approach tends to
marginalise cultural and demand side aspects.
• The TIS approaches do not typically address the forces that
come into play when a new technology attempts to supplant a
dominant technology.
• The approaches focus more on the functioning of systems, viz.
the element weaknesses, rather than system changes.
• Though emphasis is placed on identifying system weaknesses,
less attention is paid to their development, and the reasons
behind them, and therefore little attention is paid to system
dynamics.
• TIS approaches focus on large actors, such as dominant
institutionsandrms,andtendtoneglectsmallerones,such
asgrassrootsmovementsandindividuals(Lachman2013:273)
In the next sub-section we look at a broader, social-systems
approach for analysing systems innovations.
Table 3. Functions of technological innovation systems (Bergek et al 2008; Suurs 2009)
More recently, attention has turned to the dynamics of innovation
and the so-called functions of innovation systems. The main
purpose of this approach is to consider all the activities that
contribute to the development, diffusion, and use of innovations
as system functions. Table 3 provides an example of seven
functionsasanalysedbyBergecketal(2008).Thepremiseis
that, in order to properly develop, the system should positively
fullallsystemfunctions.Thereisusuallymorethanonewayto
achieve function success.

12
Kampetal(2009)isaninterestingcasestudythatcompares
the successful development and diffusion of PV (photovoltaic)
power in Japan with the problematic situation of PV in the
Netherlands using the Technological Innovation Systems (TIS)
framework.Theylookedatthefullmentofeachoftheseven
system functions and also examined the interactive dynamics
between them. In particular, positive interactions between
system functions can lead to a reinforcing dynamic within the
TIS, creating virtuous cycles that promote the development
and diffusion of the technology. On the contrary, vicious
cycles, which result from negative interaction between system
functions, lead to reduced activities in relation to other system
functions, thereby slowing down or even stopping the progress.
By observing positive and negative interactions, it is possible to
determine the presence of self-reinforcing virtuous and vicious
cycles which respectively support or hinder the functioning of
the TIS.
The authors found that different functional patterns were indeed
occurring in the PV innovation systems. In the Japanese case,
theyfoundthatallsystemfunctionswerebeingfullledand
were interacting with each other in a positive way, setting in
motion virtuous cycles that enabled the implementation of PV.
The main system functions that triggered the positive build-
up of the Japanese PV innovation system were guidance
of research, as policies were based on a shared vision, and
policies were for the long-term, thereby providing certainty
and support to entrepreneurs and investors in order to set up
projects and invest in PV technology. Furthermore, there was
strong support from advocacy coalitions and market formation.
IntheNetherlandsnotallsystemfunctionswerefullledanda
vicious cycle resulted, so that the Dutch PV innovation system
collapsed as soon as institutional conditions changed. Due
to the lack of guidance of research and market formation, the
entrepreneurial activities and resource mobilisation declined,
resulting in the end of many projects; this in turn led to a loss of
knowledge and skills as there was no feedback from practice,
resulting again in a lack of human capital for the installation of
projects.
4.2. Socio-technical transition theory
The socio-technical transition approach is another heuristic
framework that is part of an ongoing research program pioneered
byDutchresearchers(Elzenetal2004;Kemp1994Geels2005;
Rotmansetal2000).Thesocio-technicaltransitionapproach
is an umbrella term that includes the multi-level perspective
(MLP) and multi-phase model, transition management (TM) and
strategic niche management (SNM). The last two approaches
emerged partly from MLP and have a more normative and
governance orientated focus for supporting radical innovations
and system transformations. We explore the MLP here, and
will examine SNM and TM in Section 5, ‘Policy and Strategy
Implications’.
The MLP approach differs in focus and scope from the TIS
approach, as summarised in Table 4. The MLP research emerged
partly from historical studies of system changes and evolutionary
economics. The approach is conceived in a societal context
that is broader than the Innovation Systems approach. The
rstversionwasintroducedbyRipandKemp(1998)andwas
renedanddevelopedinthe2000sbytheempiricalresearchof
FrankGeels(2005).Acentralthemeistherecognitionoftheco-
evolutionary development of technologies, institutions and social
and economic subsystems.
Box 2: Photovoltaic Technological Innovation Systems –
A comparison between Japan and the Netherlands
PhotobyPNNLviaFlickrCCBY-NC-SA2.0

13
Technological Innovation Systems Multi Level Perspective
Focuses on: Prospects and dynamics of a particular
innovation
Prospects and dynamics of broader
transition processes/variety of
innovation
Concerned with: Successful diffusion of a particular
technology or product
Successful transformative societal
processes
The MLP posits three levels to aid in understanding transitions:
landscape (macro-level), regimes (meso-level) and niches (the
micro-level).
• Landscape level (macro) is the overall socio-technical setting
that encompasses the dynamics of deep cultural patterns,
macro-economics and macro-political developments that make
up the environment or context of socio-technical transition.
It is the backdrop to the regime and niche levels, which
stimulates and exerts pressure on the socio-technical regime
and the technological niches and so plays an important role in
stimulating socio-technical transitions.
• Regimes level (meso) comprises the structures that represent
current practices and routines, including the dominant rules
and technologies that provide stability and reinforcement to
the prevailing socio-technical systems. The regime is also a
presents a barrier to change, including new technological and
social innovations (see Box 3).
• Niches level (micro) is the level in which space is created for
experimentation and radical innovation. The niche level is more
loosely structured than the regime and is less subject to market
andregulationinuences.Thereismuchlessco-ordination
among niche actors than among regime actors, but this allows
for the emergence of new interactions between actors that may
support innovation.
The strength of the MLP approach is that transitions can be
explained by the interplay of stabilising mechanisms at the regime
level, combined with destabilising pressure from the landscape
andradicalinnovationsattheniches(MarkardandTruffer2008).
In particular, the breakthrough of innovations is dependent
on multiple processes in the wider context of regimes and
landscape. A graphical interpretation of these dynamics is shown
in Figure 4.
Box 3: Mobile phone contracts as
unsustainable regime practices
An example of a dominant regime practice that leads to millions
of mobile phone handsets being prematurely disposed of every
year is plan-based contracts. These are usually offered with
highly subsidised or free handsets bundled into the contract.
When the contract has expired customers are usually offered
a new contract with the sweetener of the “latest” handset.
Under such circumstances the previously existing handset
becomesseeminglyworthless.Crocker(2013)hasnotedthat
thejusticationgivenbyphoneserviceprovidersthattherapid
churn of handsets is due to either the pace of technological
change or to consumer preference is largely disingenuous.
There are usually few practical contract alternatives available
and the consumer is actively encouraged to dispose the
old handset, even when the new one has only marginal
improvements. As with driving to work when no alternatives are
provided, the system becomes compulsory.
Table 4: Technological Innovation Systems (TIS) and Multi Layer Perspective (MLP) compared
PhotobyIritaKirsblumaviaFlickrCCBY2.0

14
The niches are loosely structured and there is much less co-
ordination among actors than there is among the regime actors.
The regimes are more structured than niches and the rules of the
regimes have co-ordinating effects on actors through a strong
guidance of the actors’ activities. Landscapes are even more
structuredthanregimesandaremoredifculttochange(Geels
2005).Nevertheless,asFigure4suggests,landscapesinuence
change both on niches and regimes; in return, niches (may)
change the regimes and a new regime changes the landscape
in the longer term. The socio-technical landscape in this model
is relatively static, stands for the external context and represents
the physical, technical and material setting supporting the society,
and cannot be changed by the actors in the short term (Geels
&Schot2007).Landscapesareconstitutedbyrapidexternal
shocks, long-term changes and factors that do not change or
changeonlyveryslowly(VanDriel&Schot2005).
Kempetal(2001)identifythreestrategiesforchangingregimes.
Therststrategy,promotedbyeconomists,callsforchanging
the structure of incentives and allowing market forces to
function. This strategy is problematic especially when used in
relation to environmental improvements. In order for policies
targeting market forces to have an impact, these policies have
to be drastic. For example, although the dramatic rise in the
marketpriceofcrudeoilfromUS$3abarrelin1973toUS$30
in1983resultedinstagnation,fossilfuelscontinuedtobethe
dominantenergysources(Farrell1985).Inaddition,theuseof
economicincentivesmayleadtotemporarywindfallprotsfor
manufacturers and dead weight losses for consumers. A further
problem is that the incentives need to be supported by corrective
measures to counter possible harmful effects of the innovations
favoured by the incentive.
ThesecondstrategyKempetal(2001)identifyis“toplanforthe
creation and building of a new sociotechnical system based on
an alternative set of technologies, in the same fashion as decision
makers have planned for large infrastructure works, like coastal
defencesystemsorrailwaysystems”(279).Thisapproachis
also problematic because in advanced, modern and pluralistic
societies a new technology system cannot be completely planned
due to emergent properties stemming from co-evolutionary
dynamics between technologies and social systems.
The third strategy they identify is to “build on the ongoing
dynamics of sociotechnical change and to exert pressures so as
to modulate the dynamics of sociotechnical change into desirable
Figure 4. Multi-level perspective on transitions (Schot and Geels 2008)
directions. For this strategy, the task for policy makers is to
make sure that the coevolution of supply and demand produces
desirable outcomes, both in the short run and in the longer term”
(280).Kempetal(2001)preferthisthirdstrategysinceitappears
to be the only feasible one in contemporary society. In order to
manage transitions through this strategy, the lowest level of MLP
model, i.e. the niches level, plays an important role since niches
arewhereradicalinnovationsemerge(Geels2002).

15
Sustainable transport and the Multi-level
Perspective
Geels(2012)givesanexampleofanapplicationoftheMLP
approach to the auto-mobility systems in the Netherlands and
UK, where most sustainability experts agree that transition to
new kinds of transport systems is necessary. To understand
the dynamics of such a transition, Geels uses a socio-technical
approachwhichgoesbeyondseekingasimpletechnologyx
or behaviour change. Systemic transitions entail co-evolution
and multidimensional interactions between industry, technology,
markets, policy, culture and civil society and Geels uses the
multi-level perspective to identify and analyse these interactions
Geels reviews promising niche developments (e.g. inter-
modal travel schemes; travel demand management initiatives;
public transport innovations; green propulsion technologies),
landscape pressures (e.g. climate change public concerns; peak
oil; diffusion of ICT) and discusses whether these pressures are
enough to create cracks in the current transport regime given
the many stabilising and lock-in mechanisms in place (e.g. sunk
investments in road, urban and spatial infrastructures; consumer
preferencessuchasconvenienceandspeedthatbenetcars;
vested interests such as the car making industry; beliefs from
established actors that take existing practices for granted and
legitimate the status quo.) The MLP does not provide a crystal
ball on what is likely to happen to our transport system or on
what niche development should be promoted, but rather is
useful for making a comprehensive analysis of the possibilities,
barriers and drivers of transitions towards sustainable transport.
PhotobyStevenVanceviaFlickrCCBY-NC-SA2.0

16
5. Policy and strategy implications
The frameworks discussed above have been used to support the
formulation of innovation policies. By focusing on the dynamics of
change and their drivers they allow for a perspective on fostering
innovation that goes beyond mere diagnosis of externality
market failures, which is the main feature of innovation policies
basedonneoclassicaleconomics.Inthissectionwebriey
consider some of the potential policy and strategy implications
of three policy approaches based on the previous section.
Therstisbasedaroundthetechnologicalinnovationsystems
framework. The second and third, which have a heritage in the
socio-technological transitions literature, are strategic niche
management and transitions management.
The examination of policy and strategies for fostering low carbon
innovations and transition will be a major aspect of the Visions
and Pathway 2040 project and will pursued more deeply in later
reports and other outputs. The purpose of this section is to give
aavourofthemethodsandscopeofpolicyinterventionsand
insights that arises from the systemic views that characterise the
theories we have been examining.
The effectiveness of these approaches in initiating or fostering
radical or systemic changes is still to be proven. This is partly due
to the relatively recent development of these frameworks and
their moderate uptake by governments so far, the Netherlands
being the most notable exception. Nevertheless, the way these
policies have been theoretically conceived and initial experiences
do hold promise that they can contribute to radical and systems
innovation. Further research and experience will be required
to fully understand the strengths, complementarities and
weaknessesoftheseapproaches(NillandKemp2009).
5.1 Technological innovation systems policy
implications
The technological innovation system approach has been used for
investigating emerging sustainable technologies such as electric
vehicles(HekkertandNegro2009),biofuels(SuursandHekkert
2008)andhydrogenfuelcells(Suurs2009).Asdiscussedabove,
thekeyideaisthatforatechnologicalsystemtoourishthere
should exist a set of key structural elements that are interacting
successfully, such that certain key activities or functions are
beingfullledinthesystem.Thepolicyapproachisthereforeto
monitor these structures and functions to analyse what weakness
exists within the system and thus propose recommendations on
how improvements could be made. A key point is that different
types of system problems are likely to require different types of
instruments.
The most systematic policy framework to methodically identify
structural and functional weaknesses has been proposed by
WieczorekandHekkert(2011).Theyuseavestageprocess:
3.
Mapping the structural dimensions and their capabilities.
The analysis starts with mapping and identifying the structural
elementsoftheanalysedsystem,asinTable2.
4.
Coupled functional-structural analysis.
Using the seven
functionsofinnovationsystemsclassicationscheme(see
Table 3), each function is evaluated on a 1–5 scale using a
set of diagnostic questions for each function as a guide. For
example, with Function 1 (entrepreneurial activities):
• Are there enough entrepreneurs?
• What is the quality of entrepreneurship?
• What types of businesses are involved?
• What are the products?
• To what extent do entrepreneurs experiment?
• What variety of technological options are available?
• Are any entrepreneurs leaving the system?
• Are there new entrepreneurs?
WieczorekandHekkert(2011)recommendanalysingeach
function from the perspective of the four major structural
elements (actors, institutions, interactions and infrastructure)
and identifying which of these elements are causing the
weakness or absence of function.
5.
Identication of system problems.
This stage involves
summarising the problems that hinder the development of
the system in terms of functions evaluation (absent, weak,
etc.),reasonswhythespecicfunctionisabsent,weak,etc.
(“blocking mechanisms”) and classifying the systems problem
in terms of whether it is an actor problem, interaction problem,
institutional problem or infrastructure problem.
6.
Systemic instruments goals.
Havingpreciselyidentied
systemic problems, the next stage is to align these problems
with the systemic policy instrument goals that would address
the problem. A scheme for potential systemic instrument goals
associated with each systemic problem is presented in Table 6.
7.
Systemic instrument design.
Finally, an instrument or set
of instruments can be chosen from a set of standard tools
availableinthepolicyeld(orperhapsthecreationofanew
policy instrument to address the policy goal). The chosen
instrument(s) must not only address the goals of the systemic
instrument but must also be chosen with sensitivity to the
interaction with other instruments, socio-political constraints,
and impact of other, perhaps competing TISs. An overview
of standard instruments to address different system problem
goals is presented in Table 7.

17
Systemic problem (Type of) systemic problem Goals of systemic instrument
Actor problems Presence? Stimulate and organise participation of actors
Capabilities? Create space for actors’ capability development
Interaction problems Presence? Stimulate occurrence of interactions
Intensity? Prevent too strong and too weak ties
Institutional problems Presence? Secure presence of (hard and soft) institutions;
Capacity? Prevent too weak/stringent institutions
Infrastructural problems Presence? Stimulatephysical,nancialandknowledgeinfrastructure
Quality? Ensure adequate quality of infrastructure
Source:WieczorekandHekkert(2011)
Table 6: Goals of systemic instruments per (type of) systemic problem
Theresultofthesevestagesshouldbeanintegratedand
coherentportfolioofinstrumentsthataddresstheidentied
systemic problems of the given technological system. Its purpose
is to create opportunities and conditions for system formation that
would not emerge spontaneously. Since policy making is a cyclic
process, over a period of time the evaluation of the effectiveness
of the policy instrument should later serve as in input into a new
iterationoftheabovevestagepolicydesignprocess.

18
Goals of systemic instruments Examples of individual instruments
1. Stimulate and organise participation of actors Clusters;newformsofpublicprivatepartnerships,interactivestakeholderinvolvementtechniques;publicdebates;scientic
workshops; thematic meetings; transition arenas; venture capital; risk capital
2.Createspaceforactors’capabilitydevelopment Articulation discourse; backcasting; foresights; road-mapping; brainstorming; education and training programs; technology
platforms; scenario development workshops; policy labs; pilot projects
3. Stimulate occurrence of interactions Cooperative research programs; consensus development conferences; cooperative grants and programs; bridging instruments
(centres of excellence, competence centres); collaboration and mobility schemes; policy evaluation procedures; debates facilitating
decision-making; science shops; technology transfer
4. Prevent too strong and too weak ties Timely procurement (strategic, public, R&D-friendly); demonstration centres; strategic niche management; political tools (awards and
honours for innovation novelties); loans/guarantees/tax incentives for innovative projects or new technological applications; prizes;
Constructive Technology Assessment; technology promotion programs; debates, discourses, venture capital; risk capital
5. Secure presence of (hard and soft) institutions; Awareness building measures; information and education campaigns; public debates; lobbying, voluntary labels; voluntary
agreements
6. Prevent too weak/stringent institutions Regulations (public, private); limits; obligations; norms (product, user); agreements; patent laws; standards; taxes; rights; principles;
non-compliance mechanisms
7.Stimulatephysical,nancialandknowledgeinfrastructure Classical R&D grants, taxes, loans, schemes; funds (institutional, investment, guarantee, R&D), subsidies; public research labs
8.Ensureadequatequalityofinfrastructure Foresights; trend studies; roadmaps; intelligent benchmarking; SWOT (strengths, weaknesses, opportunities and threats) analyses;
sector and cluster studies; problem/needs/stakeholders/solution analyses; information systems (for program management or project
monitoring); evaluation practices and toolkits; user surveys; databases; consultancy services; tailor-made applications of group
decision support systems; knowledge management techniques; Technology Assessments; knowledge transfer mechanisms; policy
intelligence tools (policy monitoring and evaluation tools, systems analyses); scoreboards; trend charts
Source:WieczorekandHekkert(2011)
Table 7 Innovation systems targeted policy goals and instruments

19
5.2 Strategic niche management
Strategic niche management (SNM) highlights the importance of
protected spaces and of user involvement in early technological
development. It can be seen as focusing on the niche level of the
MLP framework discussed in Section 4. The aim is to create new
technology pathways which are able to penetrate the prevailing
regime (or be part of a realignment of the regime) so as to replace
unsustainable technologies as part of the dominant regime (Kemp
etal1998).
The approach was partly inspired by historical studies showing
that many successful innovations started as a technological
niche and only gradually overturned a dominant regime (e.g.
GeelsandSchot2007).Historicalstudieshavealsoshownthat
potentially valuable sustainable technologies have often failed to
develop fully, or to catch on in the market, even though they may
had superior performance characteristics. Thus the approach
attempts to purposefully craft and guide such niches to give
promising technologies time to develop.
SNM is a process orientated approach with a focus on
experimenting and learning. The objective is not to achieve
a particular outcome in terms of use, since the desirability of
a new technology cannot be taken for granted. Rather, the
major concern with SNM is to establish processes by which
experiments can evolve into viable market niches and ultimately
contribute to a shift towards a more sustainable socio-
economicenvironment.Ifafterasufcientperiodofincubation,
a technological niche has not evolved into a commercially
sustainable market niche, then support of the policy experiment
may be discontinued.
SNM as a policy tool is not exclusively a government top-down
process for creating niches. Rather, the niche creation and
nurturing can be steered by a range of actors, including users
andsocietalgroups,andhavebeendenedasaformofreexive
governance(SchotandGeels2008).
DepictionsoftheSNMapproachoftenincludeavephase
process(Kempetal1998;Kempetal2001;Weberetal1999):
(i) the choice of technology; (ii) the selection of the experiment; (iii)
the set up of the experiment; (iv) scaling up of the experiment and
Table 8. Strategic niche management guidelines and potential dilemmas
Policy area Policy guidelines and potential dilemmas
Expectations, visions • Beexible,engageiniterativevisioningexercises;adjustvisionstocircumstancesandtakeadvantageof
windows of opportunity
• Be persistent, stick to the vision, persist when the going gets tough
Learning • Create variety to facilitate broad learning
• Too much variety dilutes precious resources and prevents accumulation. It also creates uncertainty and
may delay choices/commitments (by consumers, policy makers)
Upscaling • Stepwiselearningandbricolagestrategy.Disadvantages:(1)slow,(2)incrementalsteps
• Breakthroughstrategyandbigleapstoachievesuccessrapidly.Disadvantages:(1)dangeroffailure,(2)
misalignment with selection environment
Network • Work with incumbent actors, who have many resources, competence and “mass”. Try to change their
agenda, visions
• For radical innovations, it is better to work with outsiders, who think “out of the box” and have new
ideas. Incumbents have too many vested interests and will try to hinder or encapsulate radical
innovations
Protection • Protection is needed to enable nurturing of niche-innovations
• Do not protect too long and too much. This might lead to limited exposure to selection pressures (and
the danger of creating white elephants)
Niche–regime
interaction
• Wait for cracks in the regime, and vigorously stimulate niche-innovations. Until such windows of
opportunity arise, niches should be nurtured to facilitate stabilisation.
• Usenicheexperiencestoinuenceperceptionsofregimeactorsandactivelycreatecracksinthe
regime.
Source:SchotandGeels2008.
(v) breakdown of the protection. Across these phases a number
of guidelines have emerged. We summarise some of them and
associatedpotentialpolicydilemmasinTable8.

20
As with the other policy approach, SNM has not been without
criticism. Some have criticised it for being too much of a bottom-
upstrategy(e.g.Berkhoutetal2004)andfocusingoninternal
niche processes (such as learning, networking, visioning) at
the expense of external niche processes. Furthermore, there is
as yet scant evidence of consciously designed SNM initiatives
becoming major learning vehicles for wider change towards new
socio-technologicalregimes(CaniëlsandRomjin2008).Most
SNM experiments have remained at the stage of single activities.
However,SNMcanstillbeviewedasausefulframeworkfor
generating learning about needs, technology imperfections and
strategies to overcome them, and for building actor networks
(NillandKemp2009).Apolicyapproachwithagreaterfocus
on the role of external niche processes can be seen in transition
management.
5.3 Transition management
The transition management (TM) policy approach adopts a
broad systems perspective that embraces all three levels of the
MLP framework. It is concerned with the dynamics of structural
change in society and when and how transformation can be
initiated, facilitated, and shaped. As in SNM, the importance of
experimentingandlearningiscentral.However,thestartingpoint
of TM is not a technological innovation but a societal challenge,
such as how to meet the need for energy, transportation or
housinginasustainableway(vanderBoschandRotmans2008).
Asareexiveandparticipativemodeofgovernance,TMaims
to steer our socio-technical systems towards desirable social
outcomes, with engagement with stakeholders at multiple levels
and testing the practicality of ideas through experimentation,
learning and adaptation as the primary motors of change.
Conceptually, the TM framework comprises two key lenses: a
descriptive distinction into strategic, tactical, and operational
innovation spheres, and a prescriptive cyclical framework of co-
evolvingactivitiesthatconnectthesespheres(Loorbach2007,
2010).
The three spheres of activities in TM are:
•
Strategic activities
. These involve the formation of long term
goals and vision development that will lead to changes in the
culture of a societal system. This includes dialogues on norms
and values, identity, ethics or sustainability. This focus coincides
with the landscape level in the MLP framework.
•
Tactical activities.
These involve activities directed at
implementing a transition agenda towards the desired goal and
relate to interactions between actors that can build and align
the new vision into the regime level. This can include activities
relating to changes in structures, such as investments and
other resource distributions, rules, incentives and underlying
infrastructure. Negotiations regarding interests are more
common in this sphere. It also involves understanding barriers
that may inhibit the advancement of the visions and propose
adjustments that may be needed.
•
Operational activities.
These activities relate to the
experiments and learning-by-doing at the niche level, often with
an emphasis on radical and disruptive innovations that may
lterupintotheregimeandlandscapelevels.
An essential mechanism in this approach is the transition arena,
a setting that provides an informal but well-structured space
to a small group of change-agents from diverse backgrounds
(businesses, government, research institutes, community
organisationsandcitizens)(Roordaetal2012).Thisisorganised
in such a way that it helps to build a group of ambassadors who
are inspired to go beyond current interests and daily routines.
The participating change agents engage in a series of meetings
to develop a new, shared visionary story which they can directly
link to their own everyday practice. The Visions and Pathways
2040 project is an example of such an arena in pushing for the
transitions to a low carbon and resilient built environment in
Australia.
At all three levels, but particularly at the strategic level, an
important conceptual tool that is increasingly highlighted in
the literature is the creation of “transition scenarios” which are
plausible, coherent narratives of pathways that could bring about
the desired end state. Transition scenarios can help engage
and align stakeholders, but can also help prepare more resilient
strategies by anticipating deviations from trends (Sondeijker
2009),
In the TM literature, these three spheres of activity are connected
in a cyclical path as illustrated in Figure 7 (Loorbach and Rotmans
2006):
• Problem structuring and the establishment and development of
a transition arena
• the development of a long-term vision, transition pathways and
agenda for sustainable development
• the mobilisation of actors and knowledge development through
experimentation
• the monitoring, evaluation and learning from the transition
process.

21
Since the TM approach is relatively new, with only a handful of
case studies to draw from, the methodology is still under debate
(Lachman2013).Somecriticismsinclude:currentpracticesfocus
mostly on the niche-regime dynamics (e.g. SNM) to the neglect of
the broader transitions process; there has been an inherent bias
in TM implementation towards incumbent actors, which may have
inhibited new players’ ability to break through into the regime
(SmithandKern2009);ShoveandWalker(2007),castingdoubt
on societies’ ability to transform themselves, criticise the social-
engineering tint of TM and the central role given to technical
change in societal transitions (arguing that culture and social
practices have been neglected in TM practice).
The adaptation of Transition Management to the urban context
and its transnational application constitute an important part of
a European project named MUSIC (Mitigation in Urban Context,
Solutions for Innovative Cities). This Interreg-funded project
isaco-operationbetweenvecitiesinnorth-westernEurope
and two research institutes – the Dutch Research Institute For
Transitions (Drift), Erasmus University, Netherlands, and and
PublicResearchCentreHenriTudor(Luxembourg).
The overall aim of the MUSIC project is to catalyse and
mainstream carbon and energy reduction in urban policies,
activities and the built environment. The MUSIC cities will use
the transition management method developed by DRIFT to
guide this process. This method includes a series of workshops
with several stakeholders (businesses, government, research
institutes, citizens) resulting in a local sustainability vision and
action plan.
Figure 7 Activity clusters in transition management
Source:LoorbachandRotmans(2006)andvanderBrugge
andvanRaak(2007)
The local action plans and energy planning tools being tested in
pilot projects include:
• Aberdeen: renovation of a school to become more energy
efcientandatthesametimeincreasingtheenergyefciency
awareness of students and parents
• Rotterdam: development of new cooperation models between
public and private sectors to make public buildings less energy
consuming. These models will be applied to swimming pools
and smart roofs
• Ludwigsburg: building of an energy neutral community centre
in a socially and economic weak district, where local residents
will be informed on energy reductive measures
• Montreuil: building of an energy generating school building.
Local residents and students will be involved and informed
during the whole building process
• Ghent: developing a participation project to receive support
from the users and inhabitants of the city. Also, Ghent will do
a major pilot of a GIS support tool by proclaiming the energy
saving message during several events.
Box 5: Cities transition management and the MUSIC project

22
6. Conclusion
The creation of a more sustainable urban environment is likely
to require radical or disruptive innovations that will result in a
system transformation in the way we organise our economy and
society. Such change may not be easy to achieve as there are
various forces of inertia in our infrastructure, institutions, social
practices, laws and regulations and vested interests which
willresistsuchchange(Unruh,2000).Thisreviewhaspointed
towards some of the concepts and frameworks that may help
analysing and prescribing the types of policies and strategies that
will help initiate and foster such radical innovations and system
transformation.
The modern theory of innovation and transitions provides a
number of related concepts and insights. It presents a nuanced
and rich picture of the innovation and transition process, with
a wide set of implications for those hoping to assist, shape or
direct the innovation process and system change. Key ideas
include appreciating the importance of actor networks; the role
of institutions; the co-evolutionary nature of the technologies,
institutions, social practices and business strategies; the role of
feedback and path dependency in socio-economic systems; and
a greater understanding of the different types of knowledge and
learning processes. Frameworks such as technological innovation
systems (TIS) and the multi-level perspective (MLP) have provided
useful analytical structures for developing innovation and
transition policies and strategies.
Perhapsthemostbasicbutsignicantndingfromthisliterature
review is that facilitating transformative change requires
acknowledging that it is an emergent, collaborative, multi-actor
and multi-level process that will involve business, government,
research and civil society. By bringing together stakeholders in
dialogue to develop visions and pathways for a more sustainable
future, the Visions and Pathways 2040 project and the CRC for
Low Carbon Living can hopefully contribute to this transformative
task for Australia.
Photo©JessicaBird,VEIL,2014

23
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