ANTECEDENTS OF COMPANY BEHAVIOR IN ENERGY TECHNOLOGY DEVELOPMENT: INSIGHTS FROM THE SOLAR INDUSTRY

M e a g a n S . M a u t e r , P h . D .A s s i s t a n t P ro f e s s o r , C h e m i c a l E n g i n e e r i n g a n d E n g i n e e r i n g & Pu b l i c Po l i c yC a r n e g i e M e l l o n U n i v e r s i t ym a u t e r @ c m u . e d u

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Enabling water and energy efficient technologies by identifying and addressing the technical and

structural barriers to their implementation

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ANTECEDENTS AND EFFECTS OF COMPANY BEHAVIOR IN ENERGY TECHNOLOGY INNOVATION AND IMPLEMENTATION

The trajectories and dynamics of energy innovation are intrinsically linked to the companies invested in energy technology development.

Innovation◦ How do firms respond to energy technology innovation policy instruments? In

particular, do instruments influence the type of innovation alliance formation?◦ How do technology characteristics affect a firm’s propensity to form exploration

and exploitation alliances?

Implementation◦ How much variation exists in the extraction of energy resources?◦ Does firm level variation dominate technology level or resource level variation?

Environmental Impact◦ How do lessons from “Innovation” and “Implementation” change the outlook for

the costs of water/energy impact abatement?

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Impact of Technology Characteristics on the Formation of Exploration and Exploitation Alliances –Insights from the Solar Photovoltaic Industry

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ETI Policy Instruments

Anadon and Holdren, 2008

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Theoretical FrameworkDeployment (Market

Pull) PoliciesContextual FactorsCorporate Investments

in Technology Innovation

Technology Push Policies

Policy Induced Market Growth

Firm and Technology

Characteristics

Investments in Exploration(e.g. R&D)

Investments in Exploitation

(e.g. production)

Policy Induced Technology Push

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Innovation Partnerships Amid trends towards increasing speed of innovation and rising complexity of products, firms no longer rely exclusively on in-house capabilities for innovation

Increasingly rely on external partners who provide complementary resources and serve as a source of learning in fields where a company might possess little expertise (e.g., Mowery et al., 1998; Rosenkopf and Almeida, 2003)

http://americanenergyinnovation.org/

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Exploration vs Exploitation

Exploration◦ “search, variation, risk-taking, experimentation, play, flexibility, discovery, and innovation”

(March, 1991)◦ search for new technologies◦ e.g., R&D alliances

Exploitation◦ “refinement, choice, production, efficiency ,selection, implementation and execution” (March,

1991)◦ enhance the firm’s capacity to commercialize existing technologies◦ e.g., production and marketing alliances,

Exploitation alliances enhance learning by doing, potentially lowering costs faster than learning by searching (R&D)

A strong focus on technological exploitation relative to exploration will yield less radical innovations, reduce technological diversity, and may increase technological lock-in (Malerba, 2009; Sandén, 2005).

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Previous literature attributes a firm’s balance between exploration and exploitation using

◦ industry-level antecedents such as competitive intensity (e.g. Jansenet al., 2006; Levinthal and March, 1993)

◦ firm-internal factors such as firms’ slack resources (e.g. Greve, 2007; Nohria and Gulati, 1996) or their technology portfolio (Quintana-García and Benavides-Velasco, 2008)

◦ Alliance type may be influenced by the complexity, maturity, or the tacitness of the knowledge they draw upon (Grant, 1996)◦ Theory, but no empirical analysis to date

Empirically test how technology characteristics affect a firm’s propensity to form exploration vs exploitation alliances?

Exploration vs Exploitation

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Hypotheses

H1: The larger the technological complexity of a firm’s product, the more likely the firm is to form an exploration rather than an exploitation alliance.

H2: The larger the technological maturity of a firm’s product, the less likely the firm is to form an exploration rather than an exploitation alliance.

H3: The larger the tacitness of technological knowledge of a firm’s product, the more likely the firm is to form an exploration rather than an exploitation alliance.

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H_b: The larger the _____ of a firm’s product, the more likely the firm is to form an exploitation alliance which involves a stronger exploratory component.

Increased complexity, reduced maturity, and greater tacitness leads to investment in R&D partnerships

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Hypotheses Relevance to PV

The solar PV industry is a suitable research setting for analyzing the effect of technological characteristics on exploration and exploitation alliances as

1) A large part of the industry’s evolution occurred over the past 15 years. There was a 200 fold increase in installed capacity between 1998-2012.

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Hypotheses Relevance to PV

The solar PV industry is a suitable research setting for analyzing the effect of technological characteristics on exploration and exploitation alliances as

1) A large part of the industry’s evolution occurred over the past 15 years. There was a 200 fold increase in installed capacity between 1998-2012.

2) There are several PV technologies with different characteristics which may turn out to become the ‘winning technologies’, each at different stages of technological maturity

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Overview of PV Technologies

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Hypotheses Relevance to PV

The solar PV is a suitable research setting for analyzing the effect of technological characteristics on exploration and exploitation alliances as

1) A large part of the industry’s evolution occurred over the past 15 years. There was a 200 fold increase in installed capacity between 1998-2012.

2) There are several PV technologies with different characteristics which may turn out to become the ‘winning technologies’, each at different stages of technological maturity

3) Technology development has played a key role for firm strategies in the solar PV sector

4) In the face of a highly dynamic environment, firms have made extensive use of alliances

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Research Methodology Information on inter-firm alliance agreements was obtained from the Factiva database.

1079 alliances for which we extracted the announcement year, the partner’s identities, and the type of agreement.

◦ exploration alliances as those alliances that include knowledge generating R&D agreements

◦ exploitation alliances involve joint marketing and services, original equipment manufacturer/value added reseller (OEM/VAR), licensing, production or supply.

Technological complexity -> product position in the value chain (ingots and wafers vs final PV system)

Technological maturity -> wafer-based crystalline silicon, thin-film PV and emerging PV.

Tacit knowledge -> geographic proximity between the alliance partners

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likelihood of exploration vs. exploitation alliance

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Summary of Hypotheses Tests

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Implications propensity to form exploration vs exploitation alliances depends on the characteristics of the technology, namely maturity and tacitness

exploration alliances are particularly common in the early stages of a technology in the life-cycle when there is a considerable amount of technological uncertainty

success of exploration alliances may more strongly depend on developing close ties to a number of trusted partners, rather than a mere reliance on formal, well-developed contractual relationships

measures used by policy makers to support a specific industry may need to evolve in response to changes in the technology life-cycle