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Model Appendix and Sensitivity Analyses
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Now organizations are always vulnerable to the liabilities of newness, but such pressures are especially severe when an industry is in its formative years. We focus on one set of constraints facing entrepreneurs in emerging industries-their relative lack of cognitive and sociopolitical legitimacy. We examine the strategies that founders can pursue, suggesting how their successful pursuit of legitimacy may evolve from innovative ventures to broader contexts, collectively reshaping industry and institutional environments.
One of the key features of our economies consists of the coexistence of different technologies supplying similar products and services. We often observe that an old technology is improved when a new one appears; behind this process of improvement often lies an intentional research activity. There thus begins a competition between the two technologies whose performances are improved via R&D. We focus our attention on this competition process and supply a formal model, based on the optimization of R&D expenditure of both technologies, which can describe the dynamics of the delayed overtaking of the new technology over the old one.
Formal modelling is potentially a useful method to help understand the many mechanisms underlying transitions and their complex interactions. This article reviews existing models of transitions. It examines the mechanisms they cover, and to what extent the models contribute to understanding core characteristics of transitions, notably multi-domain interactions, inertia to change resulting from path-dependency, and the processes that induce, and contribute to self-reinforcement of, change. It is further assessed how well the models capture real world mechanisms and how this is motivated. It is concluded that models addressing the full extent of transitions suffer from a weak micro-foundation and empirical validation, which is largely due to the scope of transitions and the fragmented theoretical basis of transition research. It is proposed that transitions be broken down into particular problems and components, and that where possible associated areas of interest be defined and addressed in corresponding models.
Plotting the performance of a technology against the money or effort invested in it most often yields an S-shaped curve: slow initial improvement, then accelerated improvement, then diminishing improvement. These S-curves can be used to gain insight into the relative payoff of investment in competing technologies, as well as providing some insight into when and why some technologies overtake others in the race for dominance. Analyzing renewable energies from such a technology S-curve perspective reveals some surprising and important implications for both government and industry. Using data on government R&D investment and technological improvement (in the form of cost reductions), we show that both wind energy and geothermal energy are poised to become more economical than fossil fuels within a relatively short time frame. The evidence further suggests that R&D for wind and geothermal technologies has been under-funded by national governments relative to funding for solar technologies, and government funding of fossil fuel technologies might be excessive given the diminishing performance of those technologies.
Modern societies are encountering environmental and political problems in the sphere of energy supply. One way to deal with this is to support the development of sustainable energy technologies. Since the development and diffusion of renewable energy has proved to be a very slow process, strategic insight is needed into how the emergence of these technologies takes place and how this process can be accelerated. The objective of this book is to gain insight into the dynamics of technological change with a focus on sustainable energy technologies. As the theoretical starting point, the Technological Innovation Systems (TIS) framework is used. The TIS is a structure made up of actors, institutions and technologies, in which the development and diffusion of new technologies takes place. For the successful development of a technology, a TIS needs to be built up. This build-up is understood as the unfolding of key activities, or system functions, that take place within the TIS. The system functions are types of activities necessary for a TIS to develop and to yield fruitful innovations. These involve Entrepreneurial Activities, Knowledge Development, Knowledge Diffusion, Guidance of the Search, Market Formation, Resource Mobilisation and Support from Advocacy Coalitions. The author develops the idea that the build-up of a TIS, especially in a formative stage, can accelerate due to positive interactions between these system functions. These positive interactions are called motors of sustainable innovation. The development of motors of sustainable innovation is studied in several historical case studies situated in the Netherlands and Sweden (biomass gasification, biofuels, hydrogen fuel cells and automotive natural gas). Based on these studies, a typology of motors is constructed. Strategic lessons are drawn that specify which interventions can be taken to support particular motors.