Ecological Economics 32 (2000) 319–332

ANALYSIS

Redefining innovation — eco-innovation research and thecontribution from ecological economics

Klaus Rennings *Center for European Economic Research (ZEW), Research Area En6ironmental and Resource Economics,

En6ironmental Management, P.O. Box 103443, D-68034 Mannheim, Germany

Received 31 July 1998; received in revised form 29 July 1999; accepted 30 July 1999

Abstract

While innovation processes toward sustainable development (eco-innovations) have received increasing attentionduring the past years, theoretical and methodological approaches to analyze these processes are poorly developed.Against this background, the term eco-innovation is introduced in this paper addressing explicitly three kinds ofchanges towards sustainable development: technological, social and institutional innovation. Secondly, the potentialcontribution of neoclassical and (co-)evolutionary approaches from environmental and innovation economics toeco-innovation research is discussed. Three peculiarities of eco-innovation are identified: the double externalityproblem, the regulatory push/pull effect and the increasing importance of social and institutional innovation. Whilethe first two are widely ignored in innovation economics, the third is at the least not elaborated appropriately. Theconsideration of these peculiarities may help to overcome market failure by establishing a specific eco-innovationpolicy and to avoid a ‘technology bias’ through a broader understanding of innovation. Finally, perspectives for aspecific contribution of ecological economics to eco-innovation research are drawn. It is argued that methodologicalpluralism as established in ecological economics would be very beneficial for eco-innovation research. A theoreticalframework integrating elements from both neoclassical and evolutionary approaches should be pursued in order toconsider the complexity of factors influencing innovation decisions as well as the specific role of regulatoryinstruments. And the experience gathered in ecological economics integrating ecological, social and economic aspectsof sustainable development is highly useful for opening up innovation research to social and institutional changes.© 2000 Elsevier Science B.V. All rights reserved.

Keywords: Innovation; Evolutionary economics; Technology; Economic incentives and disincentives

www.elsevier.com/locate/ecolecon

1. Introduction

Since the world community committed itself in1992 in Rio to the principles of sustainable devel-opment, it has become more and more clear thatsustainability means long-term and far-reaching

* Corresponding author. Tel.: +49-621-1235-207; fax: +49-621-1235-226.

E-mail address: rennings@zew.de (K. Rennings)

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K. Rennings / Ecological Economics 32 (2000) 319–332320

changes in technologies, infrastructure, lifestylesand institutions.

Thus, the importance of a better understandingof innovation processes has several reasons:� The demand for drastic reductions of environ-

mental burdens, e.g. of greenhouse gases, im-plies that adaptation within existingtechnologies is not sufficient. Instead, regula-tion strategies to effect ‘technology forcing’and/or ‘technological regime shifts’ are needed.

� Secondly, innovation is expected to offset bur-dens and costs induced by environmentalregulations. Secondary benefits of an innova-tion-friendly environmental policy are oftenseen in reduced costs, increased competitive-ness, creation of new markets for environmen-tally desirable products and processes,corresponding employment effects, etc. Al-though these aspects have already been empha-sized by Porter and van der Linde (1995a), thePorter hypothesis postulating ‘innovation off-sets’ of strict environmental policy is not em-bedded in economic theory and is received withscepticism among mainstream economists(Jaffe and Palmer, 1996; Ulph, 1996).

� New types of vehicles, renewable energy sys-tems or corresponding infrastructure oftenneed at least a decade or more for invention,for adaptation and for diffusion, respectively.In total, it is realistic to assume time-scales ofhalf a century and more for major changes inimportant economic and social sub-systems,like technological regime shifts in energy andtransport systems. Thus, in situations far awayfrom the desired equilibrium, the importance ofanalyzing transition and learning processesmoves into the foreground.

� Moreover, many scenarios suppose that long-term sustainability goals cannot be met byprogress in environmental technology and mustbe supplemented by corresponding lifestyles,e.g. through energy saving or changing mobil-ity patterns, and institutional changes (rangingfrom local networks to global organizations).

� Inventing or adapting environmentally desir-able processes or products is already part ofevery day life for a large majority of firms and,thus, a field of scientific research. As Cleff and

Rennings (1999a) have shown in a Germanindustry survey, about 80% of all innovatingfirms are involved in environmental-friendlyinnovation projects. It is hard to find even asmall or medium sized enterprise that has noexperience at all with substituting hazardoussubstances, designing and using eco-efficientproducts, saving energy, waste and material orreducing emissions. Managing eco-innovationis an increasingly important issue for manyfirms.

� Finally, innumerable sustainability programsand initiatives have been set up to promoteinnovative policy responses and correspondingscientific research to improve the understand-ing of global environmental change and it’srelation to economic and social systems. Hav-ing this in mind, together with long time-scales,a careful valuation of experiences seems to becrucial to identify key determinants and successfactors of innovation processes toward sustain-ability, i.e. to analyze which experiments suc-ceeded, which failed, why they failed and inwhich phase.Due to the fact that existing theoretical and

methodological frameworks do not address theseproblems adequately, research needs can be iden-tified to improve our understanding of innovationprocesses toward sustainability in their differentdimensions, complex feedback mechanisms andinterrelations. Such a framework should be ableto give some guidelines about how to analyze thedriving forces of these processes in their differentcharacteristics and phases, to identify promisingexamples as well as bad ones, and to give someidea about their transferability to other contexts.

This paper intends to discuss the potential con-tribution of neoclassical and (co-)evolutionary ap-proaches from environmental and innovationeconomics to fill this gap. A crucial question iswhether innovations toward sustainability can betreated as normal innovations or if a specifictheory and policy are needed. The paper is orga-nized as follows: Section 2 redefines the terminnovation considering its relation to sustainabledevelopment. Section 3 describes main economicapproaches for analyzing innovation processesand environmental policy, i.e. neoclassical and

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