Strategic responses to fuel cell hype and disappointment

Technological Forecasting & Social Change 79 (2012) 1084–1098

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Technological Forecasting & Social Change

Strategic responses to fuel cell hype and disappointment Kornelia Konrad a,⁎, Jochen Markard b, Annette Ruef c, Bernhard Truffer b a b c

Department of Science, Technology & Policy Studies, University of Twente, P.O. Box 217, 7500 AE Enschede, The Netherlands Cirus — Innovation Research in Utility Sectors, Eawag, Swiss Federal Institute of Aquatic Science and Technology, Überlandstrasse 133, 8600 Dübendorf, Switzerland Holinger International Consultants GmbH, Kasthoferstrasse 23, 3000 Bern 31, Switzerland

a r t i c l e

i n f o

Article history: Received 7 February 2011 Received in revised form 29 July 2011 Accepted 28 September 2011 Available online 9 February 2012 Keywords: Collective expectations Organizations Hype cycle Innovation system Fuel cells

a b s t r a c t This article investigates the interplay of expectation dynamics and innovation processes at the level of organizations and at the innovation system level. We examine how different kinds of organizations contributed and responded to a recent hype and disappointment cycle in the field of stationary fuel cells. Among others, we trace how innovation and discourse activities changed and we explain the observed differences in strategic responses. We show that the sensitivity of organizations to expectation dynamics depends on at least three factors: the strategic embedding of the new technology, the organization's dependence on external legitimacy and its role in the innovation system. Moreover, we show that – in their aggregation – strategic responses affected the level of the technological innovation system as well. Not only did the pace and direction of innovation activities change, but structures such as actor constellations and institutions were also modified. Our study thus provides insights into the interplay of expectation and innovation dynamics, which is important for our understanding of larger transformation processes, e.g. toward more sustainable modes of energy supply. © 2012 Elsevier Inc. All rights reserved.

1. Introduction The energy sector, like several other sectors, faces major challenges in terms of sustainability. A transition toward more sustainable modes of energy production and consumption therefore seems desirable, despite the challenges associated with such fundamental shifts in existing sectors [1–4]. Radical innovations such as decentralized energy technologies are expected to play a key role in such transformation processes [5]. Stationary fuel cells, as a means to efficiently co-generate heat and electricity, are an example of a radical energy technology [6]. Fuel cells feature prominently in visions of a more sustainable and decentralized future energy system [7,8]. If stationary fuel cells were implemented in large numbers of decentralized units (e.g. in offices and buildings) operated and coordinated by energy providers this would imply radical changes in the energy sector, both in terms of grid infrastructure and energy service provision. However, one of the key challenges for such radical changes is that a broad range of different actors have to come ‘together’ and complement each other as they provide and improve the underlying technologies, change institutional frame-conditions or develop new business models [9–11]. New technologies need input from research institutes, technology developers, component suppliers and service providers, just as support from financiers, policy agencies and intermediaries. At the same time, radical innovations confront firms and other organizations with high uncertainties. In early stages of development, many facets of a novel technology are unknown: technical performance, future application contexts and customers, viable business models, economic performance, regulatory conditions or societal impacts. Under such conditions, innovating actors have to rely on expectations rather than on robust knowledge for taking strategic decisions and coordinating their efforts. Especially collective expectations,

⁎ Corresponding author. Tel.: + 31 53 489 39 06; fax: + 31 53 489 2159. E-mail address: [email protected] (K. Konrad). 0040-1625/$ – see front matter © 2012 Elsevier Inc. All rights reserved. doi:10.1016/j.techfore.2011.09.008

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i.e. expectations that are acknowledged by a broad range of actors, have been shown to play a particular role in this regard [12– 14]. In the following we will take a closer look at the interplay of collective expectations and the strategic actions of different kinds of organizational actors in the field of stationary fuel cells. The importance of collective expectations for innovation processes has been demonstrated, among others, in the sociology of expectations literature — a strand within science and technology studies [13–15]. Largely, these studies have shown how collective expectations motivate and guide innovating actors and how they coordinate these actors by providing a common reference point. In the literature on technological innovation systems and strategic niche management, expectations have been identified to guide the development of new technologies, to shape the trajectories of technological niches and, in specific cases, to also contribute to sustainability transitions [16–18]. When collective expectations are widespread, system-wide effects seem likely due to the sheer number of actors affected. System-level effects may result from a coordination of actors by these expectations and from the aggregation of motivating and guiding effects over a broad range of organizations in the field. In innovation studies, however, we are just beginning to understand the interplay of the strategies of organizations and the development of innovation systems [19]. Moreover, we have to investigate in more detail, how different actors are affected, because not all organizations may react in the same way to hype and disappointment. Hence, in line with the thrust of this special issue, we assume that an enhanced understanding of the impact of collective expectations on the micro level of innovating organizations is a prerequisite to understand and estimate aggregated effects at the meso level of an innovation system. In this article we approach processes mediating between the micro and meso level of innovation and expectations from two directions. Firstly, for the case of small stationary fuel-cells in German-speaking countries, we investigate how innovating actors contributed and responded to the evolvement of collective expectations as part of a hype-disappointment cycle. 1 Hype cycles are frequently observed in relation to the emergence of new technologies: expectations on the promising potential of an innovation get widely accepted and become increasingly enthusiastic, often accompanied by steeply rising media attention, but later on attention and expectations cool down rather suddenly, typically because expectations cannot be met [20–22]. While disappointment is generally assumed to have a detrimental effect on the development of a field [20], an earlier study of two of the authors [23] showed that this is not necessarily the case. In order to learn more about actual strategic responses of innovating actors, this article takes a closer look at how a number of major actors in stationary fuel cell innovation actually adjusted their strategies and activities to both hype and disappointment. We examine both innovation activities and discourse activities (e.g. public communication) to understand not only the effects on innovation strategies, but also how innovation actors try to influence expectation dynamics. In a subsequent step, explanations for the eventual differences in strategic responses are sought. In particular, we are interested to understand how organizational characteristics may explain the specific responses of innovation actors. Secondly, we will discuss how these responses in all their diversity aggregate and impact the level of the innovation system. The paper is structured as follows. First, we review how different strands of literature have dealt with the influence of expectations on the organizational and system level of innovation. As a synthesis, we present the analytical framework which guided our analysis. The third section gives a short account of a recent hype and disappointment cycle on fuel cells, and of our sample and methods. The fourth section presents our findings on responses of fuel cell actors on both the hype and the disappointment phase and the organizational characteristics affecting the responses. Section 5 concludes by discussing the implications of our findings for the system-level of innovation. 2. Expectation dynamics, innovation strategies and systems Science and technology studies have highlighted the decisive influence that collective expectations may have on the strategic decisions of actors involved in the development of novel technologies [13,14,22,24]. Collective expectations are institutionalized expectations that are acknowledged by a broad range of actors; they are part of a social repertoire [14]. That does not necessarily imply that all actors personally share these expectations, but usually they are aware of them being part of the discourse within a community or the broader public. Collective expectations thus constitute a reference point for actors involved in innovation processes who have to position themselves and legitimate their activities against the background of these expectations [14]. In the following we review the literature on expectations in innovation in order to better understand and extract the factors that might explain diverging responses of organizations to expectation dynamics. 2.1. Expectation dynamics and innovation activities Collective expectations affect innovation activities in different ways. They motivate actors to engage in promising technological fields [14,15], they guide technology development and contribute to path creation [16,25]. Moreover, expectations and visions coordinate various actors involved in innovation processes by providing a common reference point [14,22] or by ascribing – implicitly or explicitly – roles for different actors [26]. As another key function, collective expectations legitimize the allocation of resources, both within and between organizations [14,24]. The institutional view on collective expectations and visions and their importance for organizations to achieve internal and external legitimacy is certainly a crucial issue here [24,27]. Collective expectations and visions have been shown to be very 1

For an analysis of the role of expectations for actor strategies in the field of vehicle propulsion see Budde et al., this issue [52].

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influential institutional forces that affect the diffusion of new information systems and management techniques [24,28]. The ups and downs in the adoption of popular management techniques have even been compared to a fashion cycle [29]. Uncertainty and particularly dependency on other organizations have been highlighted as motivations for such bandwagon effects [27,30]. Therefore, we assume that for organizations which are strongly dependent on other actors such as investors or public opinion legitimation by collective expectations is particularly important. Such organizations can be expected to react rather sensitively to changes in collective expectations. Given the importance of expectations, they are also the target of strategic action, i.e. actors deliberately contribute to the formation of collective expectations. Technology proponents, for example, widely communicate positive prospects of the innovation in order to mobilize public funding [15] or they join forces with other organizations to improve the public image of a technology [31]. With many actors trying to shape the technology discourse, different expectation dynamics can be observed. Discourse activities may reinforce each other resulting in high-rising expectations or they may work against each other, for instance in the case of competing expectations [32]. High-rising and hyped expectations have been observed in a variety of technological fields [14,15,20,23]. Hypes can be very stimulating as they attract attention and resources in the beginning. When they break down however, they may severely damage the legitimacy of the new technology and its proponents [20], although less detrimental developments with just partial disappointment have been observed as well [23]. In sum, insights from the sociology of expectations and institutional theory underline the crucial impact that collective expectations and visions may exert on the development of novel technologies and the strategies of organizations involved. At the same time, studies have highlighted the essential role of organizational actors in shaping the very expectation dynamics they and others are exposed to. Despite the potentially intensive ‘discourse work’ that different actors direct at collective expectations, expectations still unfold dynamics that usually none of the actors can control. As a consequence, even organizations or strategic alliances that are very actively influencing a technology discourse have to deal with expectation dynamics as a quasi-external phenomenon in their institutional environment. While insights from the sociology of expectations build the backbone of our approach, they are not yet a sufficient basis for understanding the effects of hype cycles for specific organizations with specific characteristics and, secondly, for estimating how these impacts aggregate to effects at the system level. Therefore, we will complement these findings with insights from further strands of research. 2.2. Expectations and the system level The development of new technologies is a result of the dynamic interplay of a broad range of different organizational actors (research institutes, technology manufacturers, suppliers, service providers, venture capitalists, policy makers, etc.) and institutional structures (design standards, regulatory guidelines, support programs, collective expectations, etc.). This interplay of actors and institutions in a specific technological field is at the core of the literature on technological innovation systems [17,33,34] and strategic niche management [35,36]. A key tenet in these strands of research is the importance of collective expectations providing guidance and coordination at the level of technological innovation systems and technological niches [16,37]. Within technological innovation systems literature, collective expectations have been reported to impact on innovation system functions, which are understood as key processes in an emerging technological system [33]. Expectations influence the direction of search processes within an innovation system [17,33,38] and they induce new actors to enter the innovation system [33]. Moreover, expectations have been identified as a major incentive to finance and conduct research [17], and as a factor that triggers entrepreneurial activities [17,39]. Finally, the creation of legitimacy has been highlighted as well [37]. Thus, the effects of collective expectations that have been identified from an actor and organization-oriented perspective are important from a systems perspective as well. With regard to a number of intrinsically system-level processes the literature has, however, remained largely silent so far. This holds for explicit system-building activities (see also Musiolik et al., this issue), such as the creation of networks and institution-building, and to the issue of whether collective expectations affect specific organizations in different ways. This is somewhat surprising. Systematic differences in how organizations respond to expectation dynamics may aggregate at the system level affecting for instance the actor constellation in an innovation system. Especially in a phase of disappointment after a hype, it will be crucial for the development of a technological innovation system whether some organizations react more or less sensitive. Geels and Raven [16] found indications for that in a study on biogas niche dynamics. Different groups of actors, namely farmers and researchers, responded more or less sensitively to disappointments regarding the technical and economic outcome of specific pilot projects. A more systematic analysis of this phenomenon will be at the core of this paper. As an inroad for this analysis, we suggest considering specific conditions at the organizational level, which may determine how innovation actors respond to expectation dynamics. These conditions and characteristics may be specific for individual organizations or for groups of organizations as firms and research institutes, which fulfill a specific role in the innovation system. In the next section, we therefore briefly refer to the major insights of a research strand in strategic management highlighting the role of specific resources and expectations for explaining persistent differences among organizations. 2.3. Expectations and strategy differences The resource-based view has gained attention in the strategic management literature since the 1990s and has become a very influential framework seeking to explain why organizations are different and why some firms are continuously more successful than others [40,41]. The resource-based view traces the performance of firms back to firm-specific resources as assets,

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competences and capabilities, that are difficult to transfer, and considers a firm's expectations as to what will be the future value of these resources as key to its strategic choices and future performance [42–44]. Barney [42] suggests that so-called ‘unique’, firm-specific expectations which are deducted from the specific knowledge and considerations of the specific resources of a firm are particularly important for the formation and success of strategies. While we are not so much interested in explaining the success of a firm, 2 these assumptions may help to explain why organizations choose diverging strategic responses, e.g. in the light of changing collective expectations. This strand of research focuses on firms; still, we assume that the basic insights are applicable to other types of organizations as research organizations as well, provided we consider their specific conditions. Organizational resources, which are often difficult to imitate or transfer, include reputation [45], organizational culture [46] or specific technological competences [47]. In the case of emerging technologies, we can assume that the specific knowledge stocks and technological competences an organization controls are particularly important with regard to its sensitivity toward the dynamics of collective expectations: organizations, which control resources that are highly complementary to the needs and characteristics of the emerging technology, may be more likely to sustain phases of disappointment. We furthermore assume that this holds all the more for organizations that have high individual expectations of the emerging technology and, hence, value complementary resources particularly high. 2.4. Analytical framework At the core of our framework (cf. Fig. 1) are different kinds of organizations including firms as well as research institutes. We distinguish strategic responses of these organizations along two dimensions: Innovation activities are activities that are closely related to technology development (e.g. R&D projects or field tests). Discourse activities are public communication activities about the novel technology. For both dimensions, we analyze how activities change over time. Changes in innovation activities may show in decisions to take up, increase, exit, postpone or reduce fuel cell projects (motivating function of expectations). Related to this can be organizational changes to the internal structure as the setting up of a specific department, the creation of subsidiaries or acquisitions. In addition, activities may be modified, e.g. the pursued technologies or application foci may change (guiding function of expectations). The formation of new cooperations indicates the coordinating function of expectations. 3 Changes in the discourse activities of an organization show in the intensity and the way it publicly communicates about the novel technology. The distinction between discourse and innovation activities is not always simple and straightforward. Due to our analytical interest in differentiating strategic approaches we use a narrow conception of both, which gives particular attention to the types of activities and primary strategic aims, e.g. development-oriented work versus media-oriented work. From a more general point of view, discourse activities could also be conceptualized as innovation activities, since discourse activities may foster the innovation as well. However, for the purpose of this article the degree to which an organization makes strategic attempts to influence collective expectations is worth being investigated separately. As our findings will show, both dimensions are not necessarily coupled. Drawing on our literature review, we expect that organizations differ in their sensitivity to changing expectations. The sensitivity is high, if innovation strategies changed substantially during hype and in the subsequent disappointment phase, with hype and disappointment playing a substantial role in the decision. Sensitivity is low, if hype-disappointment dynamics have only very little influence on the strategy of an organization. The following issues might have an influence on the sensitivity and thus guide our empirical analysis below. a) Sensitivity to external legitimacy, in particular due to dependency on other actors: Organizations which strongly depend on other actors might be more sensitive to expectation dynamics, because these others can be expected to take account of the expectation in the field as well. b) Type of organization: Different types of organizations like commercial firms and public research institutes might react differently to changes in expectations, either as a result of diverging importance of the issue that is subject to changing expectations or due to diverging internal processes. c) Strategic embedding of the new technology: Organizations for which the technology represents a strategically important asset exhibiting strong complementarities with existing competences and resources are less sensitive than those for which strategic embedding is weaker. The following figure gives an overview of the main elements and relations within our analytical framework and indicates, what will be analyzed in the following sections. 3. Expectation dynamics and innovation actors in stationary fuel cell technology 3.1. The hype around fuel cells We have analyzed the more recent development of collective expectations on fuel cell technology in Germany in the form of a discourse analysis for different types of media. 4 Fuel cells in general have even lived through multiple hype-disappointment 2 Therefore, our approach is also more resistant to more recent critiques of the RBV concerning imprecise and all-encompassing resource definitions, its potential tautology and limited generalizability of the findings due to the context-specific value of resources [40,53,54]. 3 These response forms correspond largely with the strategy options which have been described in strategic management literature as possible responses of organizations to situations of uncertainty [55]. 4 An elaborate analysis is provided in a paper that is currently in preparation: Kornelia Konrad & Bjoern Budde: Fuel cell hype and the coupling of discourse spheres.

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technological innovation system

expect.dynamics Section 3.1

institutional structure & actor networks and constellation

collective expectations

meso-level strategic responses section 4.1 & 4.2

effects on innov. system section 5 micro-level innovation activity discourse activity sensitivity

dependence on others

org. type

strategic embedding

explaining factors section 4.3 organizations

Fig. 1. Overview analytical framework and steps of analysis.

cycles [48], but in this paper we focus on the effects of the most recent cycle. The repeated renewal of fuel cell expectations has most likely been facilitated by the fact that over the years fuel cell expectations shifted between different types of fuel cell technologies and different fields of applications [49]. Our analysis showed that expectations on fuel cells reflected in mass media and in the financial press 5 were steeply rising at the end of the 1990s and peaked in the years 2000/2001 with a strong focus on mobile applications in the mass media. 6 The analysis of an engineering journal furthermore indicated that optimistic expectations on stationary expectations lasted about two years longer. This is congruent with the perception of expectations within the ‘fuel cell scene’ as reported by the interviewees within our study. As indicated by the development of the attention and the appraisal for fuel cells in a large German daily newspaper (see Fig. 2), the hype around fuel cells started around 1997. The qualitative analysis of the articles shows that in the beginning this hype was largely triggered by announcements of car manufacturers, in particular Daimler–Chrysler, but other actors soon joined in as well. Over the year 1998, Daimler–Chrysler and other car manufacturers were issuing increasingly ambitious prospects for commercialization, resulting ultimately in the expectation that serial production of passenger cars was to be expected for 2004. This expectation can be regarded as a collective expectation — not because it was necessarily shared by everybody, but because it became part of a social repertoire represented in various discursive spheres and to which many actors in the innovation field had to position themselves. The interest in stationary applications rose later and focused on micro CHPs, small combined heat and power stations for single and multiple family houses. In 1999, ambitious announcements of system manufacturers, in particular the heating manufacturer Vaillant, attracted attention. In 2000 and 2001, attention to fuel cells rose very strongly within the financial press, by and large in parallel to the development of fuel cell stock prices. However, around 2001, car manufacturers had to prolong their commercialization prospects substantially, 7 which led in the first place to a shift in attention toward micro CHP, which were supposed to be earlier marketable than fuel cell cars. By 2002/2003 stationary system manufacturers had to prolong their commercialization prospects as well. In both cases, problems with the technical performance and the costs of fuel cells were major reasons why commercialization had to be postponed. It is important to note that the disappointment concerned in particular the expected time to market, whereas the general desirability of fuel cells as an efficient means of energy production was rarely questioned in the first years after disappointment set in. It was largely assumed that fuel cells would be applied in the future, although later than once expected. Thus, the legitimating expectations for fuel cells were still valid, if not underpinned due to fuel cells being 5 For mass media we focused on one of the two main German quality newspapers, Frankfurter Allgemeine Zeitung with about 1,000,000 readers, after checking that the pattern of fuel cell coverage was similar to other large German-speaking newspapers. For professional circles we focused on the VDI Nachrichten, a weekly journal for engineers and technical management with about 300,000 readers. For the financial press we analyzed a subset of the largest German daily financial and business journal, the Handelsblatt, with about 145,000 readers. 6 The dynamics in the policy and science discourse were different, but this is beyond the scope of this paper. 7 This was related to an increasing awareness of technical problems with fuel cells. Furthermore, in this time period the option to use methanol as a fuel, before envisaged for instance by Daimler–Chrysler, was abandoned with hydrogen now being considered as the only fuel option. Thus, the challenge to set up a hydrogen infrastructure became more pressing. For stationary applications this was not a real issue, since these were envisaged to be connected to the regular gas supply, at least for the short- and medium term.

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Fig. 2. Attention (# articles with fuel cell in title)8 and appraisal for fuel cell applications in the German daily newspaper Frankfurter Allgemeine Zeitung.

increasingly linked with climate change mitigation [23,50]. 9 This was an important element in convincing German policy actors to grant a 10-year support program for fuel cells in the disappointment phase. 3.2. Sampling and method Stationary fuel cell innovation is conducted by a set of heterogeneous actors, including system manufacturers, producers of fuel cell stacks, suppliers, researchers, utilities, installers, users, financial actors and policy actors. The sample in our study was chosen with the aim to cover a variety of major fuel cell actors within German-speaking countries including different types of innovation actors and actors following different fuel cell strategies. The geographical focus was chosen, because Germany is one of the highly active countries with regard to fuel cell activities and there are strong links with a number of innovation actors in Austria and Switzerland. Our sample covers major actors involved in system manufacturing (system here refers to a combined heat and power facility and not to the fuel cell alone) and fuel cell testing and distribution, which is mostly conducted by utilities, as well as component suppliers. It furthermore comprises a number of the main research organizations doing fuel cell research. We have focused our sample on large or middle-sized research organizations that are the main actors in application-oriented fuel cell research. The geographical scope implies, however, that our sample has a negative bias with regard to producers of fuel cell stacks, since major actors are largely located overseas. Finally, for practical reasons we have not included installers and users within our sample. The explorative approach of our study is reflected in the methodological approach, which is based on qualitative interviews. As a guiding heuristic for conducting and analyzing interviews we considered a broad set of possible strategic responses to hype and disappointment and considered a number of potentially explaining factors for variety in responses, which are related to the hypothesis developed in the former section. Strategic responses can be represented in relative terms (change of strategy) or in ‘absolute’ terms (for instance resources applied). In the analysis we will largely focus on the relative changes of strategies. This facilitates comparisons between organizations of very different sizes and engaged in diverging activities and serves our interest in how organizations ‘adapt’ to changes in collective expectations. In order to capture major strategic decisions regarding fuel cell innovation, the underlying rationales and the expectations within the organizations, we conducted some 30 + semi-structured, qualitative interviews with decision makers in the 8 The number of articles mentioning fuel cells in the full text is much higher. In the peak year 2001 about 150 articles were referring to fuel cells. For a qualitative analysis, the sample with fuel cells in the title was more appropriate though. 9 Only later, in particular expectations on mobile fuel cells were strongly challenged by the competing expectations on battery–electric vehicles. 2008 can be seen as a turning point, when battery–electric vehicles got more attention than fuel cell vehicles [56].

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organizations described above. In most cases, we interviewed the person who was responsible for the fuel cell activities of the organization, be they development, research, involvement in test projects or support measures. These actors can be expected to have a good overview about strategic developments in their organization regarding fuel cells and the actual activities. Considerations of the top management of the organization are reflected indirectly, through the perception of our interviewees, since these were identical only in a minority of cases. This indirect perspective was nevertheless quite revealing, in particular for the legitimating role of collective expectations in negotiating fuel cell strategies within an organization. In addition, for some organizations we were able to complement our interview series with interviews conducted in earlier years in the context of prior studies of the authors. 4. Patterns of strategic responses to hype and disappointment The decision to engage in fuel cell research, development, or testing was for many actors related to the fuel cell hype. While the overall importance of hype-related expectations for motivating innovation actors is striking, we still find significant variety in the extent to which actors are affected by and contribute to the expectation dynamics. The disappointment phase affected the strategies of a significant number of actors as well. However, the variety of responses is even greater than in the hype phase. In the following, we will first present our findings on innovation and discourse activities during the hype and disappointment phase. Subsequently, we show that the variety in responses follows certain patterns and discuss to which extent the organizational characteristics presented in Section 2 may explain the specific responses and patterns. 4.1. Responses to hype 4.1.1. Innovation activities For the majority of innovation actors in our sample rising collective expectations during the fuel cell hype were essential for the decision to either start fuel cell innovation activities or to increase former activities to a higher level, for instance moving from research projects to commercially oriented developmental projects. The latter was often accompanied by an increase in personnel and changes in the organizational structure, such as the setting up of dedicated departments or sub firms. The move in collective expectations from an initial focus on mobile applications, that is applications for the propulsion of vehicles, in particular cars, to stationary applications is reflected in the statements of many respondents explaining their motivation to take up or increase fuel cell activities. Those entering about 1998 were motivated by collective expectations on mobile applications, hoping to profit from advances gained in this application field. Those entering later – about 2000 – referred to collective expectations on stationary applications, in particular micro CHP, and – in some cases – more specifically to the expectations and activities of competitors. We would like to stress that we considered a strategic response to be motivated or affected by collective expectations only if it was explicitly related to widespread expectations outside the organization. This orientation at organization-external, widespread and, hence, collective expectations is exemplified by the following citations from a supplier firm, and a medium-sized gas utility involved in fuel cell tests. Both firms started their fuel cell activities around 1998. [The supplier firm entered the field] relatively early. At the time there was a hype in the industry, there was a lot of talk about fuel cells and [the supplier firm] has massively invested expecting that the market would develop very quickly. There were publications, market studies, which forecasted a growth within only a couple of years, which made it very attractive for [the supplier firm]. Unfortunately, these expectations never realized (Sales and Managing Director Fuel Cells, supplier A, 4/2008). Around 1998/99 we had a first project [..] well, of course one has to consider the background, that at that time the topic was pushed strongly by Mercedes. There was a small hype on fuel cells … I: That is, the Daimler story was influential? Yes, it was influential, because, you can imagine, a CEO reads newspapers […] When something appears in the newspapers, it is taken up, also by the executives, and they say, yes, something is happening, we have to take part in this (utility F, manager new technologies, 6/2008). A further system manufacturer, using a different fuel cell technology (SOFC) than the one envisaged for mobile applications and part of the stationary applications (PEM), was indirectly affected by expectations on mobile fuel cells. Here we observe a more problematic form of the coordinating function of collective expectations. Then negotiating with utilities over test projects they had to compete with and measure up to the announcements of their competitors using PEM fuel cells and, accordingly, adjusted their own plans and announcements regarding numbers of units to be tested and prices. And that was one point, 97, 98, we started with a lot of euphoria. Secondly, in that phase there were spread very ambitious plans from the automobile industry for really introducing it in the mobile sector and this created enormous repercussions, also for the stationary side, because the firms that were into the low temperature fuel cell, the PEM, they said: look, the automobile industry will make it and we will be able to use this directly, that is, costs are low, reliability high, all wonderful, problem solved. And that had repercussions in the market. At that time we stayed already in contact with the utilities, negotiating prices, numbers of units,

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and then we were somewhat under pressure, to come out with numbers of units, at relatively low prices, because the PEM had announced: all problems solved. […] So we were simply put under pressure: hey, the others can do it, why are we so slow. And then we just joined in (manager systems development, system manufacturer D, 6/2008). Collective expectations do not only constitute attractive promises for some – as exemplified by the former respondents – but are perceived as a certain pressure or more or less concrete requirements as well [14,51]. This is clearly reflected in the latter statement and the statements of two further actors. Both have initially been more skeptical about the potential of fuel cells, but felt a pressure to follow other actors, in particular their competitors. System manufacturer B set up fuel cell activities in 2000, after taking a waiting position for some time, because they didn't want “to miss the train”. Similarly, the coordinator of new technologies within a large German utility stated: At that time the topic was ‘hip’, so that it was pushed by our mother-firm; but the motivation of the Holding [not identical with the mother firm] was mainly image considerations. […] The stimulus for our mother firm to attend to fuel cells came from the public. There has always been a rivalry with our competitor in […] and those had plugged fuel cells quite a bit. This was the stimulus for setting up a strategy project within the corporate group. However, we considered the whole thing not too enthusiastic and our executive board was rather reserved regarding this topic (utility A, coordinator “New Technologies”, 4/2003). In addition to the majority of the industry actors within our sample, there are also two research organizations, which were strongly influenced by the hype dynamic. One is a small research institute (about 150 employees) dedicated to research on hydrogen and solar energy from its beginning in the late eighties, while the second one is a very large research organization (about 6200 employees) with a much broader portfolio. For the latter, the fuel cell hype and particularly projects with participation of Daimler–Chrysler allowed entering fuel cells as a strategic research field, while the former was able to intensify its activities. In both cases, the interviewees stressed that the high level of third party funding was decisive for their organization's high sensitivity to the development of collective expectations. Finally, there is a group of actors which all had some ongoing fuel cell activities before the hype and did not change their strategy substantially in response to the upcoming hype. Still, they were mostly able to increase their innovation activities to some extent, because they could profit from funding and cooperation opportunities arising as a result of the hype. Within this group we find two utilities, one of them engaged quite heavily in testing fuel cell systems for single-family houses, a system manufacturer and two research organizations. 4.1.2. Discourse activities While many of the organizations in our sample conducted some discourse activities at a moderate level, we find a small number of four organizations which followed a dedicated strategy in strongly promoting fuel cell activities — at least in the hype phase. This strategic orientation is also reflected in the appearance of these organizations in the mass media and the professional journals we investigated. These organizations promoted fuel cells basically for two reasons. Some considered intense communication necessary for attracting customers and installers to an innovative and costly technology. Their discourse activities were explicitly aimed at supporting the coordination with complementary actors within the innovation system. Secondly, communication was often targeted at rising investors' expectations. For system manufacturer A, intense communication activities at an early stage, long before market entry, seemed necessary, because they assumed it would take 5–10 years to convince installers — a group considered essential for the success of fuel cell systems. 10 Utility B opted for a strong marketing campaign in order to build up “fascination” among potential customers to compensate at least partly for the high costs of the new technology and to some extent also to develop the image among investors (utility B, manager product development, 3/2002). For the remaining two actors in this group, who were quoted at the stock exchange just as utility B, the promotion of their fuel cell activities was largely targeted at rising investors' expectations and increasing the firm value. That is, expectation dynamics within the industry were directly linked to the dynamics within the financial community. The high attention paid to the fuel cell activities of these firms is striking given that for both firms fuel cells were a marginal and loss-creating activity. Thus, the positive resonance created is due to the promises of the technology respectively new business field and not to its current value. The link with the financial dynamics is particularly striking in the case of system manufacturer D who had intensified its fuel cell activities around 1997. Still, for some years when other manufacturers were already putting their fuel cell activities upfront, they were not. This changed around 2001, when the fuel cell activities and the ongoing financial hype on fuel cell stocks were successfully instrumentalized for boosting the firm value and defending a hostile takeover. 11 …then there were a couple of [CEO] changes. And each time [the FC division] was on trial […] This calmed down around 2001, with the threat of a hostile takeover […] Then [the FC division] was taken to the surface; before it operated below the radar screen. In this way, the value of the firm was supposed to increase. […] The strategy was successful. In cooperation with a 10

Interview former product manager, system manufacturer A, 6/2008. This strategic move is also confirmed by the financial analyst supporting the system manufacturer in developing this strategy (former global head fuel cell research, large Swiss bank, 8/2007). 11

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bank, the strategy was developed how to communicate the FC story. Actually, it was only presented, how the [FC division] stood in comparison to others, certain technical features. But no conclusions were drawn; this was left to the financial analysts, to create a value for the [FC division]. And then the finance world presented values up to half a billion. And, of course, this was deployed […] (business manager, system manufacturer D, 6/2008).

4.2. Responses to disappointment 4.2.1. Innovation activities The disappointment regarding the commercialization horizons for fuel cells, firstly for mobile and later also stationary applications, affected the strategies of a number of the actors we interviewed, even if overall the effect seems to be more moderate compared to the hype effect. The number of actors giving up their fuel cell activities is smaller than those entering during the hype phase, some modified their fuel cell strategy and a significant number continued. The majority of the utilities in our sample gave up their activities or reduced them substantially, in particular those who aimed mainly at fostering the company image by their fuel cell engagement. Once collective expectations decreased, image effects were more difficult to achieve. This is explicitly stated by the coordinator of fuel cell projects in a large utility, which reduced its strategic interest and activities in fuel cells. [Image] is surely one of the drivers. […] However, two years ago there were very different opportunities for adorning oneself with fuel cells as a sign for innovativeness. That was the phase, when we developed the projects. Today this would probably come out differently, but the euphoria in the market has fired the imagination and today I am not sure, if fuel cells can be used for adorning oneself. [..] It is difficult to say, how high the priority has ever been in the company, but I would say, it has probably reduced. […] I guess, today it would be more difficult to get money for [similar projects] (utility A, coordinator fuel cell projects, 2003). Still, three utilities remained active; one even stated to have become more active by supporting institutionalization in the form of new associations and networks and lobbying for a policy support program. In so doing, they aimed at stabilizing the fuel cell field, in order to mitigate the effect of disappointment. For these organizations fuel cells were strategically more important than for other utilities. For system manufacturers the picture is quite varied. System manufacturer C, which had been little affected by the hype, continued also during the disappointment phase. Two further organizations, which had been affected by the hype, continued, even if in one case the spectrum of fuel cell technologies considered was broadened and, furthermore, other CHP technologies were added to the portfolio by means of new cooperations and acquisitions. System manufacturer D sold the division after nearly closing it down. The research organizations which had been affected at a strategic level by the hype continued their fuel cell activities, but had to reduce them to some extent, due to the indirect effect of being strongly dependent on third party funding. Research organizations with a high level of base funding were not strongly affected by the disappointment. They were able to continue their activities or increase them, even if, as stated by one interviewee, maybe not as strongly as would have been possible without the disappointment. All organizations which had been affected by the hype only loosely and did not change their strategy substantially by and large continued their fuel cell strategy and activities also during the disappointment phase. 4.2.2. Discourse activities In the disappointment phase none of the actors conducted discourse activities as intensely as in the hype phase. Those that had been very active either gave up fuel cell activities altogether or reduced their discourse activities. For instance, supplier firm A, which in the hype phase received a lot of attention, particularly from the financial press, continued fuel cell activities in a specific division, but completely stopped promoting fuel cells as one of its most promising future business fields. When after 3, 4 years no results could be shown, that is, not to the extent it was expected at the time, critical voices came up and rightly so. Since then we retreated from the public, settled comfortably within this [division] and there we are allowed to develop, so to say, unhurriedly ourselves and the market. […] Sometimes we advertise our products in professional journals, but you will not see a press release by our company in the near term (supplier firm A, sales and managing director fuel cells, 4/2008). Furthermore, as a reaction to hype and beginning disappointment a number of highly active fuel cell innovation actors including system manufacturers and utilities coordinated and institutionalized their discourse activities within a joint initiative. The initiative was created in 2001 as an attempt to moderate collective expectations, which were developing beyond what could be achieved in the actual innovation activities. In other words, discourse activities were deployed less competitively, which has arguably contributed to mitigating hype in addition to the disappointment of expectations regarding commercialization horizons. Discourse activities were by now targeted more at policy lobbying and less to the public. The fuel cell initiative was strategically founded, in order to create a neutral communication platform and to get away from a person-driven company communication, as we had conducted before. Me personally, I have of course had a share in creating the hype, for the reasons explained before, because we had our plan and thought we would get it through. […] But for mitigating

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the hype we gathered all at the roundtable and said, before our child that had fallen into the well drowns completely, how can we construct the ladder, which helps it to come out. And the ladder is the fuel cell initiative. And the communication of the fuel cell initiative has been moderate from the beginning. […]We have then embedded the firm communication within the fuel cell initiative communication. Thus, it wasn't necessary anymore, that we ballyhoo in competition, each opposing the competitor, outbid each other with hype slogans; but we said, let us create this platform and become more moderate, in order to get it going according to a new timing, maybe in 2010 (former product manager, system manufacturer A, 6/2008). Organizations which had been moderate in the hype phase and which continued fuel cell activities did not change their discourse activities substantially. 4.3. Variety in responses: patterns and tentative explanations 4.3.1. Patterns: loosely affected, followers and promoters In the last section we have examined, how the organizations in our sample responded to both hype and disappointment. We will now take a systematic look on the sample as a whole, in order to identify patterns in the variety of responses and characteristics of organizations, which may explain responses and patterns. Given the limited size of our sample, we have to be cautious with any sort of generalizing results and therefore consider our contribution as a form of bottom-up hypothesis-building, which will need further research to be corroborated. This being said, there is also an advantage of the qualitative nature of our material for approaching these questions, because it allows us to trace explaining characteristics in the accounts of the actors themselves. To facilitate analysis at the level of the sample, we have located all organizations in Tables 1 and 2. These tables illustrate on the vertical axis, if organizations have changed their strategy with regard to innovation activities as a response to hype or disappointment respectively. The horizontal axis displays the level of discourse activities during the hype and disappointment phase considering how intense and ambitious discourse activities have been. Both axes do not display absolute values of activities, in order to allow the comparison of organizations of different sizes and partly pursuing different types of innovation activities. Within our sample we can discern two distinctive sets of actors. A first comparatively small group of five organizations entered fuel cell activities before the hype and did not substantially adjust their fuel cell strategies, neither in the hype nor in the disappointment phase (marked by italics). Still, these actors were to some extent indirectly affected due to opportunities arising or closing down in the hype and disappointment phase. For the majority of actors, however, rising collective expectations in the hype phase played a key role in their decision to start or expand fuel cell activities. This larger set of actors splits up in two groups. A group of ‘promoters’ encompasses actors which conducted strong discourse activities, typically actors, which considered fuel cell expectations mainly as a promise (marked by bold letters). A second group of ‘followers’ conducted discourse activities at a modest level and perceived rising collective expectations rather as a pressure. 12 The first group of loosely affected organizations remained loosely affected also within the disappointment phase. However, there seems to be no consistent pattern of how the two other groups respond to disappointment. Within both groups some organizations continue fuel cell activities, even if some adjusted their strategy, and some organizations gave up fuel cell activities. Hence, responses to hype may be influenced by somewhat different characteristics than responses to disappointment. Furthermore, we see as a consistent pattern that all promoters reduced their discourse activities. In Section 2 we identified three organizational characteristics which are likely to influence strategic responses. In order to analyze to what extent these characteristics indeed have an explanatory value for the organizations in our sample, we relied firstly on the accounts of interviewees in how they explained and justified their strategic responses and, secondly, we systematically categorized each organization with regard to these variables and compared it to the actual responses. 4.3.2. Strategic embedding One of the, if not the most influential variable for an organization's response pattern is the strategic embedding of the fuel cell strategy. Strategic embedding refers to how strongly fuel cell activities fit with other and, in particular, more general strategic orientations of an organization. This strategic embedding is largely determined by the specific resources of an actor and by the specific expectations prevailing within an organization (see Section 2.3). It may furthermore be related to specific, and indirectly also collective, expectations on complementary or competing technologies, business models, etc., which may reinforce or weaken the strategic embedding. The relevance of the strategic embedding for choosing a specific response shows most clearly for the utilities within our sample, but adds insight also for system manufacturers. The organization-specific expectations and visions on and, related to that, the strategic relevance given to decentralized energy production – in particular combined heat and power production (CHP) – vary substantially between the utilities in our sample. The same holds for energy services as heat contracting. Heat contracting has been envisaged by most utilities as the business model for distributing fuel cells to their customers. Firms considering these elements as strategically important continued fuel cell activities throughout and after the disappointment phase. The priming for [our fuel cell engagement] was a so-called innovation workshop which we conducted with [firm X] at the executive level; […] how will the networks and the energy landscape change until 2050. Basically, already at that time [in 1997] we 12 While most organizations in our sample can be clearly assigned to one of the patterns, there is a small number of ambiguous cases. This implies that these patterns should be considered as ideal types, to which empirical cases may in principle correspond to differing degrees.

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Table 1 Innovation and discourse activities during the hype phase. Manufacturers

Utilities

Discourse activity None/low Innov. activity

Enter Increase Continue Reduce Exit

Research organizations Discourse activity

Moderate

High

B

A, E D

C

Enter Increase Continue Reduce Exit

Discourse activity

None/low

Moderate

High

G

C, D, F A, H E

B

Enter Increase Continue Reduce Exit

None/low

Moderate

D

B A, C

High

said: yes, decentralization will become enormously important and we have to develop [electricity] systems with decentralized plants. […] And that was also the reason why we started to consider fuel cells more intensively (head of energy services, utility H, 6/2008). For some actors, strategic resources as particularly strong relations to customers or installers further reinforced the strategic embedding of fuel cells. For us it fits in our company strategy decentralized production and natural gas […] or biogas. And also in our strong ties to private customers […] and it also fits in our strategy to take installers on board, we have strong ties with installers (utility D, innovation manager fuel cells, 4/2008). On the other hand, for some utilities, the strategic valuation for heat contracting has diminished over the years, which added to the disappointment with fuel cell development as such. These utilities gave up or reduced their fuel cell engagement. A number of utilities were less interested in developing a business field, but fostering the company image was a major aim for undertaking fuel cell activities. These organizations pursued a follower strategy in the hype phase and retreated from or reduced fuel cell activities in the disappointment phase. For the system manufacturers strategic embedding is important as well. The only firm that has given up the development of fuel cell CHP systems is a large corporation which is generally not active in heating or small-scale energy production. 4.3.3. Dependency on other actors In Section 2 we hypothesized that the sensitivity to external legitimacy and, hence, collective expectations increases with the dependency of actors on others, for instance for their financial endowment. Thus, we expected that stock-exchanged listed firms would react more sensitive to disappointment than those that are led by an owner–manager. This is also put forward explicitly by some of the interviewees. The R&D manager of system manufacturer B, which is led by an owner–manager, stated: I think, you can show that the technology is worth the engagement. The question is always, how long does the owner accept as a pay-off period. […] He surely thinks more longer-term than, say, a CEO of a stock corporation who has to focus more on the shareholder value than an owner–manager (R&D manager, system manufacturer B, 4/2008). Firms that are a subsidiary of a stock-exchange listed firm showed a medium degree of sensitivity, supposedly due to getting less attention than the mother firm. For research organizations, the level of 3rd party funding, either from public funding or industry funding, influences strongly their dependency on others. We have a very high third party funding share, so we are dependent on picking up on themes that are interesting for industry, where we can generate third party funding (research organization B, head of department electrochemical energy technologies, 9/2008). How did these expectation dynamics affect the actual activities at your institute?

Table 2 Innovation and discourse activities during the disappointment phase. Manufacturers

Utilities

Discourse activity None/low Innov. activity

Enter Increase Continue Reduce Exit

E

Moderate

A, B, C D

Research organizations Discourse activity

High

None/low Enter Increase Continue Reduce Exit

Moderate H D, E B, A

C, F, G

Discourse activity High Enter Increase Continue Reduce Exit

None/low

Moderate

D

A, B C

High

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Strongly, yes, yes, very strongly. We have more than 80% third party funding. That is, the money we need […] stems from industry partners and public funding programmes and if the topic is out we do not have the activities and if it is in, we have a lot of activities, that is, we are simply coupled to this trend. (director of institute, research organization C, 4/2008). Considering the whole sample, we find that seven out of eleven organizations that are highly or to a medium degree dependent on others 13 stopped or reduced their fuel cell activities, while five out of six organizations that are supposed to be least dependent on others 14 continued. Thus, even if we have to be very cautious with this type of quantitative comparisons within our sample, it rather supports our hypothesis. In addition, a high sensitivity to external legitimacy seems to increase the disposition to conduct intense discourse activities. Three of the four promoters are stock-exchange listed firms and the interaction with the financial hype has been made explicit by a number of the interviewees in Section 4.1.

4.3.4. Type of organization Finally, the function an organization fulfills within the innovation system influences its response, in particular to disappointment. The majority of the utilities, which – except for one – have not been engaged in technology development, but in applying respectively distributing the fuel cell systems to and implementing them at the users' site, stopped or reduced their activities (five out of eight). System manufacturers, however, mostly continued (three out of four) and all research organizations continued, 15 even if those that are dependent on third money had to reduce activities to some extent. We assume that this reflects the diverging sensitivity to the concrete expectations that have been subject to disappointment – the time to market entry – within the actor groups and also the specific reaction time. While utilities have been affected very directly in their innovation activities, mostly testing of fuel cell systems, and retreating to a wait-and-see strategy was a reasonable option, the latter was hardly the case for system manufacturers. As for research organizations, a postponement of market entry was not necessary a reason to stop research on fuel cells, as long as fuel cells remained to be a promising option in the middle or longer term. As stated by the leader of a research department on fuel cells: I guess all these questions [regarding commercialization horizons] you have to ask industry people, don't you? We can always retreat to the comfortable position and say, we try to make research, contribute the best we can that fuel cell technology will be attractive some day. But business plans, return of investment and the like, we don't have to think along these terms (research organization D, head of fuel cell department, 4/2008). In addition, even if activities had to be reduced, the consequences took effect only with substantial delay due to the internal processes of these research organizations. But there are delays, when we get a research contract, this is for three, four years. Assume, after we get a research contract, the interest for the topic has plummeted, then it takes still three to four years until we have fulfilled the contract. […] Hence, we get automatically a delay of three to four years, and then the trend may go up again (director of institute, research organization C, 4/2008). As a result of this strategic process [for defining research foci of the institute] requirements are set, which may well be that a certain topic will be increased or decreased by 10%. But there is a limit that within five years one cannot in- or decrease more than 20% of the basic funding. That takes longer time periods (director energy research, research organization A, 11/2008). In summary, our empirical results support our initial assumption that if the novel technology is tightly embedded into the overall strategy and has a high overlap with already existing organizational resources, sensitivity to changes in collective expectations tends to be lower and the general degree of commitment remains relatively high, even in phases of disappointment. Secondly, we found support for the assumption that organizations which are very much dependent on other actors react particularly sensitive to changes in collective expectations. Strategy makers anticipate that the organizations they depend on also orient themselves at the expectations in the field and that by following these expectations they legitimate their action. Dependence on investors and public funding were the main criteria for dependence we identified in our sample, but other criteria might be relevant as well, for instance dependence on public opinion or on complementary actors for conducting certain innovation activities. Finally, the study of factors that affect sensitivity also pointed to the fact that some actor groups seem to be more sensitive than others. For instance, utility companies exhibited much more pronounced entry and exit patterns, than other types of companies.

13 High: stock-exchange listed respectively 3rd party funding ratio >66% for research organizations; medium degree: subsidiary or 3rd party funding ratio between 33% and 66% for research organizations. 14 Firms led by owner–managers respectively 3rd party funding ratio b 33% for research organizations. 15 While some individual researchers may not even have a real choice to change their research topic, most of the research organizations in our sample would in principle have been able to make strategic reorientations.

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5. Discussion and conclusion: implications for the innovation system In the following we will discuss the implications of our results for the meso level of the innovation system, which is important to better understand the more general implications for technology development. Note, that our analysis was not a comprehensive analysis of all actors and actor networks in the system and that we can just draw some first conclusions of the strategic responses we have observed in our sample. Our results suggest that the fuel cell hype has been crucial for the formation of the innovation system. Quite a number of organizations have started or significantly increased their activities as a response to the rising collective expectations. In addition, actors who did not change their overall strategy were able to expand their activities due to better opportunities for cooperation, complementary services and funding. This shows that collective expectations exert important motivation and coordinating effects, which are particularly relevant from a systems perspective. Interestingly, the later disappointment of the hyped expectations was detrimental only for the more sensitive actors, whereas quite a number of actors continued, even if partly reducing or modifying their activities. The differences in the sensitivity to hype and disappointment observed at the level of organizations may aggregate and affect the system level in various ways. As a consequence, a technological innovation system may react more or less sensitive to changes in collective expectations depending on the constellation of actors in the system. It can be expected that hype-disappointment cycles affect an innovation system strongly, if key actors, i.e. those that play an essential role in the system, are highly sensitive. Highly sensitive actors may be those with a high sensitivity to external legitimacy (e.g. listed on a stock-exchange), research organizations with little base funding or actors with a weak strategic embedding of the new technology. Less sensitive actors, in contrast, may constitute an important backbone for an emerging technology. In the case of stationary fuel cells, system manufacturers played such a crucial role as they continued their innovation activity after the breakdown of the hype. Only one of the major system manufacturers exited the innovation system, which was already received quite negatively by a number of other fuel cell actors and also played a role for the decision of some related firms to give up their fuel cell activities as well. Furthermore, we saw that different types of actors reacted in specific ways to the disappointment phase. For instance, research institutes reacted more slowly than many of the industry actors. Hence, we might expect that research-driven innovation fields tend to be more stable than fields dominated by industry firms. As a further remarkable finding of our study we saw the actor constellations in the fuel cell innovation system changing over time — largely in relation to changes in collective expectations. Moreover, these changes in the actor constellation fed back on the expectation dynamics. Specific types of actors were attracted to different degrees and at different times depending on the evolvement of the collective expectations. This is indicated by the generally more immediate impact of disappointment on utilities in our sample compared to system manufacturers or research organizations. In addition, as reflected in the accounts of organizations quoted at the stock-exchange, the enthusiastic expectations in the late nineties and 2000 attracted actors from the financial world.16 However, quite soon, when commercialization horizons were prolonged, financial actors reduced their involvement. Remarkably, German policy actors got involved in the middle of the disappointment phase and started a large support program, triggered by the successful lobbying and linking of fuel cell expectations with rising concerns over climate change (Interview National Organisation Hydrogen and Fuel Cell Technology, 6/2008, for more details of the evolvement of expectations among policy actors see [50]). The coupling with the dynamics of financial markets created a strong incentive for a number of stock-exchange listed firms to advertise fuel cell activities and push optimistic – in some cases also avowedly overoptimistic expectations – while fuel cell activities were neither before nor after the hype phase advertised in the same way. Thus, hype dynamics were amplified, although not initiated. On the other hand, the enactment of the policy support program with a 10-year horizon both for funding and for the underlying expectations formulated in a development plan, arguably reduced to some extent the need for overly optimistic short-term promises. In addition to system-level effects which resulted from the aggregation of activities and changes in the actor constellation, our results suggest that institution- and network-building has been affected as well. Contrary to what one might expect, not only hype, but also disappointment can have a conducive effect. Network-building took place in the hype phase [11], but continued in the disappointment phase, partly as a dedicated effort to mitigate disappointment and the expected detrimental effects [see Section 4.2.1 and 11]. Comparable to the interaction between expectation dynamics and the actor constellation in the innovation system, we observe interaction between institutionalization of discourse activities and expectation dynamics. As stated in Section 4.2.2, major fuel cell actors coordinated and institutionalized their discourse activities in a new way as a reaction to imminent disappointment. Furthermore, coordination of expectations took place within new institutions such as working and strategy groups, national and international associations, and ultimately funding programs, partly also based on the use of expectation-building ‘tools’ like roadmaps (Interview National Organization Hydrogen and Fuel Cell Technology, 6/2008). The latter served as a binding point of orientation for those intending to participate in public support programs (e.g. Strategierat Wasserstoff und Brennstoffzellen 2007). These changes in modes of expectation coordination have arguably contributed to mitigation of hype just as the disappointment of specific expectations.

16

The evolvement of expectations in the financial community is analyzed in more detail in a paper still in preparation (see footnote 4).

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To conclude, our study confirmed prior findings from the sociology of expectations and related literatures on the importance of collective expectations for the course of innovation processes; in particular, the motivating, legitimating and the coordinating ‘function’ of expectations became evident. What is more, our study went beyond highlighting these processes as such, but showed that actors are involved to different degrees in the expectation dynamics, both with regard to being affected and contributing to the dynamics. While more and comparative research is surely necessary, our results suggest that differently structured innovation systems – in terms of actor constellation, funding structure and modes of expectation coordination – may show diverging degrees of robustness to hype cycles. This is important, if we are interested in how such technologies may contribute to more sustainable sector structures. Acknowledgments The authors gratefully acknowledge the financial support of the Swiss National Science Foundation. We are also most grateful for the valuable and fruitful comments of Rob Raven, Harro van Lente, three anonymous reviewers and the participants of the workshop on ‘Expectation-building and innovation processes’, held in Zurich, September 17–18, 2009. References [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37] [38]

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