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Overcoming transformational failures through policy mixes in the dynamics of technological innovation systems

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The need for challenge-led innovation policies to address grand societal challenges is increasingly recognised at various policy levels. This raises questions how to overcome a variety of ‘failures’ prohibiting innovations to flourish. A key-line of thought in theory and policy emerged since the late 1990s on the role of system failures, next to more conventional market-failure thinking. More recently, scholarly work introduced the notion of ‘transformational failures’, which implies an even broader perspective on innovation failures as resting in challenges related to transforming entire systems of production and consumption. This paper combines the literature on Technological Innovation Systems (TIS) with literature on multi-level approaches to sustainability transitions to make a contribution to this debate. In particular, this paper argues that the current literature, so far, has failed to explore how different kinds of policies, or policy mixes, can overcome transformational failures. The paper uses a simulation model (i.e. a system dynamics model) and illustrative examples on electric vehicles to explore relations between transformational failures and (mixes of) policy interventions. A key conclusion is that, in particular in the case where an emerging TIS is in a competitive relation with an incumbent system, overcoming transformational failures can be realised either by directly addressing the incumbent system, for instance by taking away its resources (which may be political challenging). Alternatively, the model results show that a clever mix of policy interventions elsewhere in the system may lead to sufficient performance improvements of the emerging TIS so that it can challenge the incumbent system on its own – albeit with a need for substantial additional resources.
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... One possible solution for these challenges and difficulties is to opt for a systematic approach, where the environment is analyzed as a complex system (Sterman 2001). Complex system modeling may broaden our understanding through quantitative evaluations (K€ ohler, Raven, and Walrave 2020). Several studies have demonstrated that the development, diffusion, and adoption of new technologies are influenced by the establishment of a technology-based innovation system (Carlsson and Stankiewicz 1991;Hekkert et al. 2007;Bergek, Jacobsson, and Sand en 2008). ...
... Much research has been done in the field of application of system dynamics in quantitative analysis of different innovation systems (Ghodsypour and Azad 2018; Samara, Georgiadis, and Bakouros 2012; Uriona and Grobbelaar 2019; Rodr ıguez and Navarro-Ch avez 2015) and in particular, technological innovation systems (Wang et al. 2021;Walrave and Raven 2016;Raven and Walrave 2020). In this research, the purpose of applying system dynamics was to identify important and influential variables on the innovative systems' performance and also to predict the results of policies on future system performance. ...
... In this research, the purpose of applying system dynamics was to identify important and influential variables on the innovative systems' performance and also to predict the results of policies on future system performance. In the latest and most complete research in the field of technological innovation systems and system dynamics, Raven and Walrave (2020) have modeled all seven functions of the technological innovation system with system dynamics and identified and analyzed the reflective interventions that bring great market growth to a niche market (Niche market is a small area of trade within the economy, often involving specialized products (Cambridge Dictionary 3 )). ...
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Transition to sustainable energies is a fast-growing field of research. Modeling complex systems can expand our possibilities in this field through quantitative analysis. Photovoltaic technology is one the best potential energy sources in Iran but until now, this technology has not been diffused appropriately. According to the review of research on PV TIS, it was found that in developing countries such as Iran, quantitative analyses based on simulation by system dynamics have not been performed and also, positive and negative effective factors on this system (incentives and barriers), not comprehensively identified. Therefore, in this study, at first, positive and negative effective factors in the PV TIS of Iran were identified and in the next stage, innovation engines were extracted. In order to develop improvement policies, Iran’s PV TIS has been modeled using a system dynamics approach, and quantitative analyzes related to its performance have been presented using Vensim Ple software. Finally, in this study, some policies have been developed to promote PV TIS performance.
... There is an emerging literature discussing the limits and boundaries to governing socio-technical change for addressing grand challenges through innovation policy (Fagerberg, 2018;Kuhlmann and Rip, 2018;Mazzucato, 2018;Schot and Steinmueller, 2018). The literature draws heavily on past writings on innovation policy but also on what could be labelled as "environmental innovation policy" (Taylor, 2008), "sustainable innovation policy" (Foxon and Pearson, 2008), "challenge-led innovation policy" (Mazzucato et al., 2020;Raven and Walrave, 2018), "grand challenge programs" (Hayter and Link, 2020), "transformative innovation policy" (Steward, 2012), and "mission-oriented policies" (Foray, 2018b;Karo, 2018;Mazzucato, 2018). In this body of literature, some contend that we may still benefit from accumulated research on innovation policy to design and implement transformative policy (Fagerberg, 2018). ...
... In order to select a relevant number of articles to assess the characteristics of TIP in each stage and understand the challenges TIP imply in the different stages of the policy cycle, we used the guidelines provided by Petticrew and Roberts (2008) to conduct systematic literature reviews. We decided not to consider grey literature in this review, as our study focuses on exploring the current academic literature as a starting point for expanding future research. ...
... Challenges such as those presented in the 2015 Lund Declaration, the Paris Agreement, and the United Nations Sustainable Development Goals (SDGs) bring new opportunities for STI policy (Schot and Steinmueller, 2018). Reflecting upon that, STI and mission-oriented policy literature are both amidst a shift towards a new frame or generation that is directed at broader environmental and social concerns, such as climate change, aging societies, degradation, public health, security, energy, mobility, etc. (Alkemade et al., 2011;Amanatidou et al., 2014;Bugge et al., 2018;Cagnin et al., 2012;Coenen et al., 2015a;Giuliani, 2018;Raven and Walrave, 2018;Schot and Steinmueller, 2018). More specifically, the transformative policy agenda shifts the focus from a mainstream macroeconomics perspective to that of socio-technical transitions (Steward, 2012). ...
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This paper reviews the emerging literature on “transformative” innovation policy (TIP) in order to (1) identify unique TIP characteristics and the challenges they imply for policymakers throughout the policy cycle and (2) examine the literature's contribution to practical policymaking. We identify five main distinguishing TIP characteristics and analyse the literature's understanding of how they influence the policymaking process. The analysis shows that the literature discusses TIP-related challenges in all stages of the policy cycle but does not provide much guidance on how to address key cross-cutting policymaking challenges such as how to achieve broad stakeholder involvement, evaluate transformative outcomes, and build up dynamic policymaker capabilities. In order for TIP ideas to be implemented in real-life policymaking, TIP scholars, therefore, need to more explicitly consider the practitioners’ perspective and develop concrete models, tools and guidelines that help policymakers address the identified challenges.
... This is because technological evolution involves the gradual growth of not only the focal technology, but also its interrelationships with neighbouring technologies (Coccia, 2019a;Simon, 1991). The current policy generations, i.e., 'technology-driven', 'supply-side', 'demand-side', and 'challenge-led' policies, that address 'market failures', 'systemic failures', and 'transition failures', respectively, mainly target single technologies and sectors (Andersen and Gulbrandsen, 2020;Andersen and Markard, 2019;Mirzadeh Phirouzabadi et al., 2020a;Raven and Walrave, 2020). For instance, most transportation policies related the growth or decline of a vehicle powertrain technology to factors other than the growth or decline of its neighbouring powertrain technologies, such as regulations (Sierzchula and Nemet, 2015), suppliers capabilities (Borgstedt et al., 2017), infrastructure (Dijk et al., 2015), corporate strategies (Wesseling et al., 2015) and oil price (Barbieri, 2016). ...
... And this includes multi-technology interactions. For example, on the basis of the TIS functions, the MLP transition pathways, and system dynamics (SD) modelling, Walrave and Raven (2016) and Raven and Walrave (2020) simulated the symmetrical modes of competition and symbiosis for the market interaction between one generic niche and one generic incumbent. Finally, multi-technology interactions can be fully investigated by stepping beyond explicit dimensions such as market share as the point of interaction (Pistorius and Utterback, 1997;Walrave and Raven, 2016). ...
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A multi-modal and multi-dimensional technology interaction framework is constructed to systematically and dynamically model and simulate the dimension, extent, and modes of multi-technology interactions. Using the Technological Innovation System (TIS), it is argued that a TIS' internal dynamics couple with the internal dynamics of neighbouring TISs vis-à-vis what is referred to as 'co-dynamics' which trade a mix of positive and negative externalities in the form of biological relationship modes. Based on the Lotka-Volterra equations, the framework is quantified and simulated via a computerised System Dynamics model, for the case of internal combustion engine, hybrid, and battery electric vehicles over 1985-2050 in the US market. The pure competition view in the strategic management literature is extended by the nuanced multi-modal interactions in ecology such as parasitic, commensal and amensalism modes. Additionally, the single-path view in the path dependency literature is extended by the nuanced multi-dimensional interactions such as knowledge cross-path interaction and market cross-path interaction. Furthermore, the TIS framework is made more outward orientated by proposing the notion of 'co-dynamics' and motors of 'creative destruction' and 'creative accumulation'. It is concluded that innovation policy mixes can possess a triple nature of 'creation', 'destruction' and 'accumulation' for interacting TISs through positive and negative internalities and externalities.
... By positing policymakers as initiators and mission coordinators, MDI policies share important features with existing frameworks such as demand-based innovation policy (Thirtle & Ruttan, 1987), policy-induced innovation (Lindman & Söderholm, 2016), challenge-led innovation (Kuhlmann & Rip, 2018;Raven & Walrave, 2020), and dedicated innovation systems, which focus on social inclusion (Pyka, 2017). Mission-driven innovation policy is hence more systemic and holistic than, for instance, the Manhattan or Apollo programs, which were directed towards specific technical goals (Organisation for Economic Cooperation and Development [OECD], 2021). ...
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... Our study has found a gap in legislation and policy development on technology adoption and usage with hacking, illegal activities and loss of trust as consequent outcomes (Upadhyay et al., 2021). This is in support of the findings of other studies (Bag et al., 2021;Raven and Walrave, 2020;Polemis and Spais, 2020). Such ad-hoc policy interventions hinder the achievement of EGD1 and EGD3. ...
Purpose The article aims to concern identification and development of pathways for a green recovery process post pandemic taking into account the role of digital technologies for unleashing the policies planned within the European Green Deal (EGD). Design/methodology/approach The study is based on a systematic literature review (SLR). The electronic databases Scopus and Web of Science (WoS) were surveyed. The authors followed the SLR guidelines laid down by Tranfield et al. (2003) and the Preferred Reporting Items for Systematic Review and Meta-analysis (PRISMA) framework and 65 articles were found eligible after thorough reading and inclusion in the analysis. Findings The article presents an innovative framework containing the digital technologies and their roles in enabling the achievement of the EGD policies and the barriers to their adoption. Originality/value The proposed framework would guide organizations and policymakers' decisions to pursue a pathway in which a green recovery is possible, mainly after the consequences of the current pandemic, considering the pitfalls of the journey. The article is original as it provides an up-to-date guidance toward an emerging theme, which is a green recovery economy including a net-zero carbon worldwide target.
... D. Guzzo et al. simulation to aid decision making in the sustainability transitions field (Holtz et al., 2015;Köhler et al., 2019), including SD (Papachristos, 2019;Raven and Walrave, 2020). In this way, the framework accommodates essential aspects of both concepts. ...
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... Some simulation models presented in the specialized literature analyse TT processes from a technological learning approach for different sectors, as the basis of technical change and technological transition and where the simple existence of technology does not imply the adoption and use of the same [58]. The TIS literature focuses on understanding how innovation systems emerge around innovations such as electric vehicles, photovoltaic technology, and biogas [59]. ...
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