Apr 6, 2011 - Abstract: Innovations have an important role in sustainability transitions and although transition policy is broader than just the stimulation of ...
Transition policy and innovation policy: friends or foes?
Floortje Alkemade, Simona Negro and Marko P. Hekkert Innovation Studies, Utrecht University
Paper presented at the DIME Final Conference, 6-8 April 2011, Maastricht
Abstract: Innovations have an important role in sustainability transitions and although transition policy is broader than just the stimulation of innovations for sustainability innovation policy can be an important part of transition policy. However, in this paper we argue that there is too little attention for the alignment of transition policy and innovation policy and that this misalignment might hamper sustainability transitions. In this paper we analyze the relation between innovation policy and transition policy and the expected consequences of this relation for societal transitions to sustainability. We will use the Dutch transition management policy case to illustrate our argument.
Keywords: Innovation policy, transition policy
1
Transition policy and innovation policy: friends or foes? Floortje Alkemade, Simona Negro and Marko P. Hekkert Society faces severe problems related to societal subsystems such as the energy-, mobilityand healthcare systems. Socio-technical transitions are necessary in order to make these subsystems sustainable. A transition is a fundamental change in the fulfillment of societal needs that unfurls in the course of 25-50 years. Innovation is a key process in transitions since transitions require the development and diffusion of a wide range of new technologies, institutions and social practices [1,2]. In the past decade two strands of literature that seek to understand and analyze socio-technical transitions have been developed; the multi-level perspective (MLP) [3,4,5,6,7] and the technological innovation systems (TIS) approach [8,9,10,11,12]. The MLP emphasizes how the alignment of trajectories within levels, as well as between levels, produces transitions. The MLP thereby distinguishes between the niche level where innovation occurs, the regime level that consists of the structures that represent the current practices and routines and the landscape level that consists of long term processes of change. The TIS framework conceptualizes the transition process as a build up process of different technological innovation systems (TIS). A TIS is the structure around a new technology or innovation. This structure consists of actors, institutions (rules of the game) and the relations between them [11]. Both approaches have been adopted by policy makers that seek to induce and accelerate transitions for sustainability. An example is the Dutch transition management policy, where a transition in the energy system is fostered by supporting variation in innovative energy innovations within a broad portfolio chosen by stakeholder platforms involving business actors, government officials, academics and environmental NGOs [13]. Innovations thus have an important role in sustainability transitions and although transition policy is broader than just the stimulation of innovations for sustainability innovation policy can be an important part of transition policy. However, in this paper we argue that there is too little attention for the alignment of transition policy and innovation policy and that this misalignment might hamper sustainability transitions. The goal of this paper is to analyze the relation between innovation policy and transition policy and the expected consequences of this relation for societal transitions to sustainability. We will use the Dutch transition management policy case to illustrate our argument. Transition policy is the effort to guide or facilitate sustainability transitions, that is, to influence the speed and direction of the evolution of a socio-technical system. Rotmans et al. [14] describe transition policy as “involving the stimulation and management of learning processes, keeping various options open, a multi-actor and multi-domain approach, and being motivated by a long-term interval goal”. In the Netherlands energy transition policy has been formally in place since 2001 and is presently well institutionalized in the national system of environmental governance [15,16,17]. Dutch energy transition policy focuses on energy efficiency and demand reductions on the one hand and the stimulation of the development and deployment of new, more sustainable, energy and mobility technologies on the other hand. The focus is thereby on disruptive technologies and the creation of technological variety. Several subsidy schemes existed until 2011 that had as a goal to stimulate innovation for sustainability. The potential contribution of the selected technologies to contribute to new industry build up was not explicitly formulated as a goal. While this approach of variety creation has resulted in limited TIS build-up for selected technologies such as biomass technologies [10,18], the next phase where selected TIS are stimulated to grow and replace incumbent production systems is not yet translated into policy [19,20].
2
Where transition policy focuses on stimulating societal transitions, innovation policy traditionally seeks to facilitate innovation with the purpose of increasing economic growth. Innovation policy may focus on stimulating basic research, providing subsidies for corporate R&D, or infant industry protection. Innovation policy can be generic focusing on the general support of innovation in new and existing industries or industry specific. An example of a generic policy is the Dutch WBSO where a contribution is paid towards the wage costs of employees directly involved in R&D in order to stimulate corporate R&D. The contribution is in the form of a reduction of payroll tax and social security contributions. Industry specific policies aim to support the emergence of new high profit industries through for example public private partnerships or thematic approaches. A second form of specific support is to ensure the competitive advantage of those industries that are considered especially well developed and important for a nation’s economy. Recently European innovation policy has explicitly acknowledged the role of innovations in addressing “major societal challenges, such as climate change, energy and resource scarcity, health and ageing” [21]. However in times of economic downturn economic growth remains a prime objective for innovation policy in most countries. While both innovation and transition policies seek to stimulate innovation, policy objectives may thus be misaligned. Transition policy has the ambition to create changes that are beneficial for society at large, e.g., a lower impact of society on the natural environment thereby taking into account the three aspects of sustainability, i.e., people, planet, and profit. While innovation policy goals may also direct innovations towards solving societal challenges, many innovation policy schemes seek to strengthen the economic positions of firms and thereby to contribute to economic growth. Transition policy and innovation policy are then only aligned when innovations that contribute both to economic growth and sustainable development are concerned (see Figure 1). Figure 1: relation between transition and innovation policy. The shaded area indicates the subset of transition and innovation policies that are aligned. While the size of this area may be increasing due to recent initiatives such as the Innovation Union or the New Green Deal [21], aligning both policy types is not trivial as we expect that transition policy and innovation policy fundamentally differ with respect to the types of innovations that are considered desirable. Transition policy has the aim to drastically change the current production and consumption system. Therefore, by definition there is a strong focus on disruptive or competence-destroying innovations [22]. Such innovations often result in worse product performance in the near term and may contribute to the decline of current regimes in the long run [23]. In the Dutch energy transition this becomes visible in the attention for potentially disruptive innovations like solar energy, electric vehicles and second generation biofuels. Transition policy thus often focuses on innovation for the longer term. Innovation policy for economic growth does not always have such a regime shift objective and therefore the focus is more on sustaining or competence-enhancing technologies. These are technologies that improve the performance of established products. These types of innovations strengthen the existing regime and the competitive advantage of incumbent firms and successful regions. Competence enhancing innovations can of course also contribute to making the incumbent regime more sustainable and thereby contribute to sustainability transitions. A risk in this scenario of regime transformation [24] is however that the innovations merely serve to strengthen the existing lock in. In some cases innovation policy also focuses on acquiring novel knowledge and on building an emerging industry. Figure 2 schematically illustrates the difference between innovation and transition policy. Because of these differences innovation policy and transition policy may not only be misaligned but even
3
conflict as transition policy focuses on stimulating the new and phasing out the old whereas innovation policy often focuses on sustaining the old. Actively phasing out the old is another area where the two policy types may conflict. Innovation leads to economic growth as it creates new demands. While sustainable development does not exclude the notion of economic growth, innovation for sustainable development focuses on increasing sustainability of existing production systems or on building new production systems that address needs/demand that were previously satisfied in an unsustainable way. This latter form of innovation for sustainable development will only be successful if the old systems are actually replaced. The two types of policy are thus mainly compatible when it comes to stimulating new potentially high profit industries that contribute to sustainability transitions. The two types of policy conflict when transition policy seeks to phase out industries that are stimulated by innovation policy or when innovations are supported that are incompatible with either profitability or sustainability goals. Below we give two examples of such incompatibilities.
Figure 2: Schematic representation of difference in policy goals between innovation and transition policies. Innovation policy strengthens old industries and tries to add some new industries while transition policies aim for regime-shifts by stimulating new industries. It is clear that not all innovations stimulated by innovation policies may contribute to sustainability goals. Similarly not all innovations stimulated by transition policy may contribute to economic growth. For example, the formation of significant home markets for more sustainable goods and services is an important part of the transition policy portfolio as the outcome of transition policy can be evaluated by the changes in product portfolios in the market place. In the Netherlands, for example, the adoption of energy efficient cars such as hybrid vehicles is subsidized by tax exemptions. From an innovation policy perspective the formation of (sophisticated) demand in home markets is only considered a viable innovation policy activity if it challenges national industries to become more innovative and thereby increases their international performance [25]. As the Netherlands do not have a domestic car industry that is stimulated or supported by these measures this particular form of transition policy is incompatible with innovation policy goals. In fact, in this case the market creation policies strengthen foreign industries instead of national ones. Another example is the case where transition policy aims to construct complete innovation systems around potentially disruptive innovations. An example are policy schemes that stimulate the shift towards a biobased economy which involves R&D investments for a wide variety of technologies, the support of experimentation with different technologies, the support of businesses, market formation efforts and a strong guidance of the search in the direction of biobased economy. Policymakers legitimize this form of industry support by pointing out the societal benefits. Innovation policy on the other hand would start by asking the question: what are the national competitive advantages in this new technological field? Policy efforts would then only stimulate these activities in which the nation excels resulting in a more (geographically) specialized innovation strategy [27,26]. In this short paper we argue that innovation policy is an essential part of transition policy but that there are fundamental incompatibilities between the two policy types. These incompatibilities arise from the fact that innovation policy often focuses on strengthening the current regime while transition policy has a regime-shift ambition [4]. Such misalignment may lead to conflicting and inconsistent policies and thereby hinder sustainability transitions.
4
Alignment between transition policy and innovation policy can only be expected in the case where policy seeks to create new profitable industries that contribute to a more sustainable society (see Figure 2). This area of alignment might however be insufficient to realize the transition to sustainability and transition policy should actively seek to increase the size and scope of this area of alignment. This can be achieved using more systemic approach when transition policy is not considered to be an additional policy effort next to many other policy domains but an overarching policy goal that helps to align all other policies. Innovation policy, industry policy, environmental policy, energy policy, economic policy, etc are then be designed and aligned with a clear transition goal in mind. However in the absence of such an overarching role for transition policy several steps can be taken to increase alignment and avoid conflicts: A first option is to broaden the area where innovation policy and transition policy overlap. This implies that sustainable development becomes a much more important theme in innovation policies. Currently we observe this trend in the Innovation Union [21]. The second option is in line with the first option as the alignment area can also be broadened when national transition policies take national capabilities into account when selecting sustainable technological trajectories. This increases legitimacy for transition policies, reduces opposition and most likely accelerates developments. Such flexible transition strategies call for international coordination [28,29]. Finally innovation policy should be consistent with transition policies that seek to phase out unsustainable industries. That is innovation policy should not seek to stimulate innovation in industries that do not fit within a sustainability transition scenario. This last option requires a re-evaluation of generic innovation policy instruments. References [1] Geels, F.W. 2005, "Processes and patterns in transitions and system innovations: Refining the co-evolutionary multi-level perspective", Technological Forecasting and Social Change, vol. 72, no. 6 SPEC. ISS., pp. 681-696. [2] Geels, F., Hekkert, M. & Jacobsson, S. 2008, "The dynamics of sustainable innovation journeys", Technology Analysis and Strategic Management, vol. 20, no. 5, pp. 521-536. [3] Kemp, R., Schot, J. & Hoogma, R. 1998, "Regime shifts to sustainability through processes of niche formation: The approach of strategic niche management", Technology Analysis and Strategic Management, vol. 10, no. 2, pp. 175-195. [4] Kemp, R. 1994, "Technology and the transition to environmental sustainability - The problem of technological regime shifts", Futures, vol. 26, no. 10, pp. 1023-1046. [5] Kemp, R., Loorbach, D. & Rotmans, J. 2007, "Transition management as a model for managing processes of co-evolution towards sustainable development", International Journal of Sustainable Development and World Ecology, vol. 14, no. 1, pp. 78-91. [6] Schot, J. 1998, "The usefulness of evolutionary models for explaining innovation. The case of the Netherlands in the nineteenth century", History and Technology, vol. 14, no. 3, pp. 173-200. [7] Geels, F.W. 2002, "Technological transitions as evolutionary reconfiguration processes: a multi-level perspective and a case-study", Research Policy, vol. 31, no. 8-9, pp. 12571274.
5
[8] Carlsson, B. & Stankiewicz, R. 1991, "On the nature, function and composition of technological systems", Journal of Evolutionary Economics, , no. 1, pp. 93-118. [9] Jacobsson, S. & Johnson, A. 2000, "The diffusion of renewable energy technology: an analytical framework and key issues for research", Energy Policy, vol. 28, no. 9, pp. 625640. [10] Negro, S.O., Suurs, R.A.A. & Hekkert, M.P. 2008, "The bumpy road of biomass gasification in the Netherlands: Explaining the rise and fall of an emerging innovation system", Technological Forecasting and Social Change, vol. 75, no. 1, pp. 57-77. [11] Hekkert, M., Suurs, R.A.A., Negro, S., Kuhlmann, S. & Smits, R. 2007, "Functions of innovation systems: A new approach for analysing technological change", Technological Forecasting and Social Change, vol. 74, no. 4, pp. 413-432. [12] Suurs, R.A.A. & Hekkert, M.P. 2009, "Cumulative causation in the formation of a technological innovation system: The case of biofuels in the Netherlands", Technological Forecasting and Social Change, vol. 76, no. 8, pp. 1003-1020. [13] Loorbach, D. 2007, Transition Management - new mode of governance for sustainable development, Erasmus University Rotterdam. [14] Rotmans, J., Kemp, R. & Van Asselt, M. 2001, "More evolution than revolution: Transition management in public policy", Foresight, vol. 3, no. 1, pp. 15-31. [15] Smith, A. & Kern, F. 2009, "The transitions storyline in Dutch environmental policy", Environmental Politics, vol. 18, no. 1, pp. 78-98. [16] Ministerie VROM, 2001. “Een wereld en een wil, werken aan duurzaamheid - Nationaal Milieubeleidsplan 4", Department of Public Housing Spatial Planning and the Environment, The Hague.. [17] Foxon, T. & Pearson, P. 2008, "Overcoming barriers to innovation and diffusion of cleaner technologies: some features of a sustainable innovation policy regime", Journal of Cleaner Production, vol. 16, no. 1, Supplement 1, pp. S148-S161. [18] Negro, S.O., Hekkert, M.P. & Smits, R.E. 2007, "Explaining the failure of the Dutch innovation system for biomass digestion--A functional analysis", Energy Policy, vol. 35, pp. 925-938. [19] Van den Bergh, J.C.J.M. 2004, "Optimal climate policy is a utopia: from quantitative to qualitative cost-benefit analysis", Ecological Economics, vol. 48, no. 4, pp. 385-393. [20] Nill, J. & Kemp, R. 2009, "Evolutionary approaches for sustainable innovation policies: From niche to paradigm?", Research Policy, vol. 38, no. 4, pp. 668-680. [21] European Commission 2010, Innovation Union Communication. [22] Anderson, P. & Tushman, M.L. 1990, "Technological Discontinuities and Dominant Designs: A Cyclical Model of Technological Change.", Administrative Science Quarterly, vol. 35, no. 4.
6
[23] Christensen, C.M., Raynor, M.E. & Leffert, J. 2003, The innovator's solution, Harvard Business School Press Cambridge, MA. [24] Geels, F.W. & Schot, J. 2007, "Typology of sociotechnical transition pathways", Research Policy, vol. 36, pp. 399-417. [25] Porter, M.E. 1990, "The Competitive Advantage of Nations", Harvard Business Review, vol. 68, no. 2. [26] Mans, P.,F. Alkemade, M.P. Hekkert and T. van der Valk. Is cluster policy useful for the energy sector? Assessing self-declared hydrogen clusters in the Netherlands. Energy policy 36(4):1375-1385, 2008. [27] Hidalgo, C.A., Klinger, B., Barabasi, A.-L., Hausmann, R. The product space conditions the development of nations. Science 317: 482-487, 2007
[28] Alkemade, F., Frenken, K., Hekkert, M.P. & Schwoon, M. 2009, "A complex systems methodology to transition management", Journal of Evolutionary Economics, vol. 19, no. 4, pp. 527-543. [29] Alkemade, F. & Hekkert, M. 2010, "Coordinate green growth", Correspondence to Nature, vol. 468, no. 7326, pp. 897. Figure 1:
Transition policy
Innovation policy
Policies that contribute to Economic growth and sustainable development goals
Figure 2:
7
Innovation policy Old
New
Old
Old
Transition policy New New
Old
Old New New New
New
New
8
