Technological reorientation for sustainability:

A dialectic industry-in-context perspective

Prof. Frank GeelsMBS/SCI

May 7, 2014

Structure

1. Introduction2. DILC-model3. Empirical examples: climate change

and US car industry4. Conclusions

1. IntroductionProblem articulation• New environmental problems are major societal challenge

(‘planetary boundaries’)• Require technological reorientation in some big industries (cars,

coal, agro-food, electricity) with powerful positions.• Radical innovation/strategic reorientation is always risky, but

does happen (exploitation-exploration, ambidextrous etc.)• More difficult for ‘green’ innovation, because of uncertainties

(about policy, consumers/markets, technology)

How does substantial green reorientation happen?

Basic ideas/assumptions [open for discussion; may vary per industry]• Incumbent firms don’t (intrinsically) care about social problems (despite CSR),

but about financial-economic performance

• They actively deny, hinder and frustrate progress with multiple strategies (especially initially)

• Industries will not change unless pushed by public opinion, policymakers and consumers [importance of industry context]

• Important to understand build-up of problem-related pressures (social mobilization + spillovers to markets) [so, ‘problems’ have their own dynamics]

• Industries will gradually develop technical capabilities and can become part of the solution [when they perceive economic opportunities]

We need to better understand temporal co-evolution of problems and solutions

Aims

• Present Dialectic Issue LifeCycle (DILC) model: struggles/conflict between industry and social groups in wider contexts

• Illustrate some core mechanisms with empirical case study: climate change and US car industry (1979-2012)

2. DILC-model (Dialectic Issue LifeCycle )- Struggles between problem stream and solution stream- Types of struggles/interactions evolve through phases

Underlying view of industry: triple embeddedness framework (TEF)- evolutionary: selection pressures + adjustment + lock-in/path dependence- strategic: aim to shape environments + adjust core characteristic- institutional theory: cognitive, normative, formal institutions (‘industry regime’)- economic sociology: embeddedness

Industry

Suppliers(finance, machines, labour, knowledge)

PolicymakersCustomers

Civil society,public discourse

Industry regime

Socio-political environment

Economic (task) environment

Technical knowledge, capabilities

Mission, identity, norms

Regulations,laws, standards

Mindset, belief system

Firms

Activists, social movements

Phase 1: Problem definition and industry denial

Phase 2: Rising public concerns and defensive industry responses

Phase 3: Political debates and industry hedging

Phase 4: Political regulations and industry diversification

Phase 5: Spillovers to economic environment (emergence of markets) and industry reorientation

3. Examples from US car industry and climate change

- First some longitudinal time-series

- Then some qualitative examples of core mechanisms/struggles

a) Public attention* Public attention (and concern) go up and down:

* Steep increase after 2005: Hurricane Katrina, Al Gore’s movie, 2007 IPCC report, Nobel Peace Prize for IPCC and Al Gore [importance of events to keep issues on agenda]

* Decline since the financial-economic crisis

b) Policy pressure also goes up and down• Policymakers follow public attention. Rising public concerns create pressure

on Congress to act and on industry to be seen to address the problem• First Bush administration (2001-2005): federal stalemate because of

ideological reasons• Second Bush administration (2005-2009) more active, because of energy

security concerns (rising oil prices), rather than climate change• 2007 Supreme Court decision (CO2 is pollutant) breaks congressional

deadlock, leading to high regulatory attention

c) Industry attention to climate change* Follows public and political attention

* Steep decrease after 2009, because of crisis, bankruptcies of GM and Chrysler, bailouts, and restructuring

d) Cumulative AFV (alternative fuel vehicle) patenting

Increases gradually (hedging), but accelerates after 2005 (HEV-market)

Industry keeps patenting after 2009, despite decreasing attention to climate Change. [so, they keep preparing for the future]

However, there is much uncertainty about ‘best’ technology Hype-disappointment cyclesReluctance to fully commit (‘betting on wrong horse’)

Hype-cycles less pronounced in patenting: firms keep options alive after attention bubbles burst

Much patenting in biofuels and improved ICE (accelerates after 2005), which shows on-going commitment to petrol cars

2010: patenting in all options on-going uncertainty and hedging rather than full commitment

Electric drive market remains small: a) limited consumer demand, b) no tough legislation

Not enough incentive to reorient towards electric cars

Salient aspects/mechanisms

I) Socio-political fight back from car industry

• Create ‘closed industry front’ (Global Climate Coalition), which attacks science + lobbies policy + debate (1989-1999)

• Attack ZEV-mandate (since 1990) in bi-annual reviews (‘technically unfeasible’, ‘costly’)

• Shape congressional debates through Detroit representatives (continuous)

• Conservative think tanks aim to open up the science base (late 2000s)

II. Innovation strategy

• Technical hedging of US automakers:a) Improved-ICE + biofuels/FFVb) Explore long-term options: shift from BEV to

FCV (only prototypes, no real marketing)

First-mover advantages and innovation race• Toyota introduces HEV in US (2001): initially derided,

but gradual success:• First-mover advantage triggers innovation race after

2004

Currently much attention for BEV, but no clear first-mover advantage yet

III. Symbolic/rhetorical innovation• In 1990 GM develops BEV (Impact) for reputation reasons, but

involuntarily triggers ZEV-mandate

• PNGV (1993-1998) promises to develop radically new technology (but no commitment to bring to market); PPP allows industry to control debate and speed of progress

• In 1997, Daimler promises to mass-market FCV by 2004

• Toyota improved its green (and innovative) credentials with the Prius (HEV), but still mainly sells ICE-cars.

• GM unveiled Volt (BEV) concept-car before bailout (to create positive reputation), but limited sales

4. Conclusions

• Industry reorientation has progressed, but remains slow• Shift from phase 3 to 4 is most difficult: from socio-

political dynamics to markets• Diversity of technical options delays full commitment

(continued ‘hedging’)• Still attached to core ICE-competence • Climate change (still) seen as externally-imposed issue

rather than market opportunity

• Industry reorientation requires internal strategy and capabilities, but also external pressures (+ struggles)