Challenges and trade-offs in corporate innovation for climate change

The international debate on addressing global climate change increasingly points at the role that companies can play by using their innovative capacity. However, up till now companies have been rather cautious in taking decisive steps in facilitating an innovation-based transition towards a low-carbon economy. This paper conceptually explores some key challenges related to innovating for climate change, in the broader context of technological change, complementary capability development and sociotechnical systems to point at trade-offs to be made by companies. We adopt a firm-level perspective to discuss a) how companies strike a balance between further development and deployment of emissions-reducing technologies, in view of the fact that there is no ‘silver bullet’ solution for climate change yet; b) how and in what way low-carbon solutions are brought to the market, by targeting consumers in either mainstream markets or niche markets; c) to what extent the success or failure of climate change innovations depends on companies’ bargaining power and willingness to cooperate with others. The paper shows how several industry and firm-specific factors - technological dynamism, complementarity between new technologies and existing assets, and ownership of specialized assets for commercialization - influence how companies strike a balance between the different trade-offs and deal with the uncertainty created by the current ‘climate policy deadlock’.

[1]  M. Jacobides,et al.  Benefiting from Innovation: Value Creation, Value Appropriation and the Role of Industry Architectures , 2006 .

[2]  D. Teece.  Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy , 1993 .

[3]  A. Hoffman.  Climate Change Strategy: The Business Logic behind Voluntary Greenhouse Gas Reductions , 2004 .

[4]  Charles W. L. Hill,et al.  Technological Discontinuities and Complementary Assets: A Longitudinal Study of Industry and Firm Performance , 2005, Organ. Sci..

[5]  Daniel A. Levinthal,et al.  Exploration and Exploitation in Organizational Learning , 2007 .

[6]  Philip J. Vergragt,et al.  Institutional Change in the Automotive Industry , 2004 .

[7]  Gregory C. Unruh.  Understanding carbon lock-in , 2000 .

[8]  Ans Kolk,et al.  Multinationals and global climate change: issues for the automotive and oil industries , 2003 .

[9]  Sanjay Sharma.  Managerial Interpretations and Organizational Context as Predictors of Corporate Choice of Environmental Strategy , 2000 .

[10]  M. Grubb.  Technology Innovation and Climate Change Policy: an overview of issues and options , 2004 .

[11]  Atul K. Jain,et al.  Stability: Energy for a Greenhouse Planet Advanced Technology Paths to Global Climate , 2008 .

[12]  Alfred Marcus,et al.  The dialectics of competency acquisition: Pollution prevention in electric generation , 1998 .

[13]  John P. Holdren,et al.  The Energy Innovation Imperative: Addressing Oil Dependence, Climate Change, and Other 21st Century Energy Challenges , 2006, Innovations: Technology, Governance, Globalization.

[14]  María J. Montes-Sancho,et al.  Deregulation and environmental differentiation in the electric utility industry , 2007 .

[15]  Alain Verbeke,et al.  Corporate strategies and environmental regulations: an organizing framework , 1998 .

[16]  Jennie C. Stephens,et al.  Growing interest in carbon capture and storage (CCS) for climate change mitigation , 2006 .

[17]  Frank W. Geels,et al.  Niches in evolutionary theories of technical change , 2007 .

[18]  Alan Pilkington,et al.  Gales of creative destruction and the opportunistic incumbent: The case of electric vehicles in California , 2005, Technol. Anal. Strateg. Manag..

[19]  P. Bloom,et al.  Choosing the Right Green Marketing Strategy , 2004 .

[20]  M. Tushman,et al.  Technological Discontinuities and Organizational Environments , 1986 .

[21]  Sanjay Sharma,et al.  A Contingent Resource-Based View of Proactive Corporate Environmental Strategy , 2003 .

[22]  Rpjm Rob Raven,et al.  Niche accumulation and hybridisation strategies in transition processes towards a sustainable energy system: An assessment of differences and pitfalls , 2007 .

[23]  D. Kammen,et al.  Underinvestment: the energy technology and R&D policy challenge , 1999, Science.

[24]  D. Leonard-Barton.  CORE CAPABILITIES AND CORE RIGIDITIES: A PARADOX IN MANAGING NEW PRODUCT DEVELOPMENT , 1992 .

[25]  Markku V. J. Maula,et al.  Exploration, exploitation, and financial performance: analysis of S&P 500 corporations , 2009 .

[26]  J. Schot,et al.  Regime shifts to sustainability through processes of niche formation : the approach of strategic niche management , 1998 .

[27]  Jonathan Pershing,et al.  Scaling up: global technology deployment to stabilize emissions , 2007 .

[28]  Marko P. Hekkert,et al.  Competing technologies and the struggle towards a new dominant design: the emergence of the hybrid vehicle at the expense of the Fuel Cell Vehicle? , 2006 .

[29]  A. Kolk,et al.  International business and global climate change , 2008 .

[30]  Mark Summer,et al.  Innovations: Technology, Governance, Globalization , 2010 .

[31]  Chad Nehrt,et al.  TIMING AND INTENSITY EFFECTS OF ENVIRONMENTAL INVESTMENTS , 1996 .

[32]  Mary Tripsas.  UNRAVELING THE PROCESS OF CREATIVE DESTRUCTION: COMPLEMENTARY ASSETS AND INCUMBENT SURVIVAL IN THE TYPESETTER INDUSTRY: UNRAVELING THE PROCESS OF CREATIVE DESTRUCTION , 1997 .

[33]  Atul K. Jain,et al.  Energy implications of future stabilization of atmospheric CO2 content , 1998, Nature.

[34]  F. Geels.  From sectoral systems of innovation to socio-technical systems: Insights about dynamics and change from sociology and institutional theory , 2004 .

[35]  John P. Holdren,et al.  Energy-Technology Innovation , 2006 .

[36]  J. Romm.  The car and fuel of the future , 2006 .

[37]  Petra Christmann.  Effects of “Best Practices” of Environmental Management on Cost Advantage: The Role of Complementary Assets , 2000 .

[38]  Björn A. Sandén,et al.  Near-term technology policies for long-term climate targets—economy wide versus technology specific approaches , 2005 .

[39]  Wendy K. Smith,et al.  A Structural Approach to Assessing Innovation: Construct Development of Innovation Locus, Type, and Characteristics , 2002, Manag. Sci..

[40]  A. Kolk,et al.  UvA-DARE ( Digital Academic Repository ) Business and climate change : key challenges in the face of policy uncertainty and economic recession , 2009 .

[41]  Karel Cool,et al.  Asset stock accumulation and sustainability of competitive advantage , 1989 .

[42]  S Pacala,et al.  Stabilization Wedges: Solving the Climate Problem for the Next 50 Years with Current Technologies , 2004, Science.

[43]  Dovev Lavie,et al.  Capability Reconfiguration: An Analysis of Incumbent Responses to Technological Change , 2006 .

[44]  M. Hoffert.  An Energy Revolution for the Greenhouse Century , 2006, Social Research: An International Quarterly.

[45]  A. Kolk,et al.  Business Responses to Climate Change: Identifying Emergent Strategies , 2005 .

[46]  R. Rothwell.  Towards the Fifth‐generation Innovation Process , 1994 .

[47]  Philip J. Vergragt,et al.  Institutional Change in the Automotive Industry Or how fuel cell technology is being institutionalised , 2004 .

[48]  A. Kolk,et al.  A perspective on multinational enterprises and climate change: Learning from “an inconvenient truth”? , 2008 .