Does the focus of renewable energy policy impact the nature of innovation? Evidence from emerging economies

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Does the focus of renewable energy policy impact the nature of innovation? Evidence from emerging economies Shantala Samant a, *, Pooja Thakur-Wernz b, Donald E. Hatfield c a

Department of Management, College of Business & Economics, Western Washington University, 516 High Street, Bellingham, 98225, WA, USA Department of Management, Barton School of Business, Wichita State University, 1845 Fairmount Street, Wichita, 67260, KS, USA c Department of Management, Pamplin College of Business, Virginia Polytechnic & State University, 346 Northern Virginia Center (NVC), Falls Church, 22043, VA, USA b

A R T I C L E I N F O

A B S T R A C T

Keywords: Innovation Push-pull policies Renewable energy Emerging economies Mature technologies Novel technologies

Prior research has demonstrated the importance of government policy in fostering innovation in sectors that face market failures, such as renewable energy. We examine the impact of policy on renewable energy innovations in emerging economies, which face market as well as institutional failures. We investigate how differences in the focus of policies may drive technology development efforts in different directions. Specifically, we propose that demand pull policies foster innovations in mature technologies by encouraging exploitation of readily available technologies, while supply push policies foster innovations in novel technologies by encouraging exploration and alleviating resource constraints in research and development. Using information on policy initiatives and renewable energy patents, we develop comparative case studies of four emerging economies over the years 2000–2015 in the renewable energy sector – Turkey, India, Brazil, and China. Our case findings illustrate that countries with a focus on pull policies innovate primarily in mature technologies, whereas ones with a focus on push policies have substantial innovations in novel technologies. We present a typology of policy and innovation focus, informed by our conceptual framework and case studies.

1. Introduction

especially in the context of EEs. However, there are differences in the types of policies implemented. For instance, in the renewable energy (RE) sector, a variety of policy instruments such as mandatory renewable energy targets, local content requirements, feed in tariffs, research grants are in use. These policies are broadly classified into demand pull policies (aimed at stimulating demand for a certain technology or industry) and supply push policies (aimed at providing research and development (R&D) and manufacturing support to an industry) (Costantini et al., 2015; Di Ste­ fano et al. 2012; Hansen et al., 2017; Peters et al., 2012). While most research has studied the impact of policy intervention on the level of innovation in a country (Brunnermeier and Cohen, 2003; Johnstone et al., 2010; Peters et al., 2012), relatively little work has studied the impact of differences in policy on the types of innovation and technologies developed (exceptions: Lee and Lee, 2013; Nicolli and Vona, 2016). Therefore, given the importance of policy in inducing innovation, the necessary next step is to understand how heterogeneity in policy support might lead to heterogeneity in innovations that countries focus on, particularly since the focus of policy support influences the focus of firms’ efforts (Fabrizio et al., 2017; Lundvall and Borr� as, 2005). Thus,

Emerging economies have been climbing the ranks as innovators in recent years (Dutz, 2016), particularly in the renewable energy sector where developed economies have traditionally been leaders of tech­ nology development (Lam et al., 2017; Zeng et al., 2017). Despite their focus on innovation in renewable energy, emerging economies (EEs) often lack key institutions that support these innovation efforts (Hos­ kisson et al., 2013; Peng et al., 2008). Further, the inability to fully appropriate rents from their innovations, results in knowledge market failures, which disincentivizes firms from investing in technology development. Thus policy intervention becomes critical for stimulating innovation in EEs (Blind et al., 2017; Padilla-P�erez and Gaudin, 2014). In addition, energy is a strategically important resource for economic activity; hence, it is critical for the economic and social development of emerging economies (Apergis and Payne, 2010). Despite this, markets fail to account for the negative impact of conventional energy on the environment and support its use. These conflicting externalities for the energy sector also make policy intervention important (Jaffe and Palmer, 1997; Norberg-Bohm, 2000; Porter and Van der Linde, 1995),

* Corresponding author. E-mail addresses: [email protected] (S. Samant), [email protected] (P. Thakur-Wernz), [email protected] (D.E. Hatfield). https://doi.org/10.1016/j.enpol.2019.111119 Received 11 May 2019; Received in revised form 10 October 2019; Accepted 16 November 2019 0301-4215/© 2019 Elsevier Ltd. All rights reserved.

Please cite this article as: Shantala Samant, Energy Policy, https://doi.org/10.1016/j.enpol.2019.111119

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the question arises – do specific types of policy intervention encourage the development of specific types of technologies in emerging economies? To investigate this research question, we examine whether differ­ ences in push and pull policies may lead to differences in the types of technologies developed in a country. Since technologies differ in the stock of knowledge accumulated over time, we categorize different renewable energy technologies into mature or novel technologies based on classifi­ cations used by prior research (e.g. Boyle, 2004; Lewis, 2011; Nicolli and Vona, 2016; Norberg-Bohm, 2000). We define novel technologies as cutting-edge technologies that are early in the technology lifecycle while mature technologies as ones that are older, established, and in the later part of their lifecycle (Abernathy and Utterback, 1978). We posit that demand pull policies will incentivize innovations in well-understood technologies that are readily available in EE markets by encouraging exploitation of existing technologies by firms. Consequently, they will foster innovation in mature technologies. On the other hand, supply push policies will alleviate resource constraints and reduce the uncer­ tainty of R&D faced by firms in EEs, and encourage exploration of novel technologies. Therefore, supply push policies will foster innovation in novel technologies. Our key insight from examining policy in EEs is that specific types of policy intervention alleviate specific problems of mar­ ket and institutional failures faced by these countries. As a result, different policies will encourage innovation in different technologies. To illustrate our conceptual framework, we perform a comparative case analysis of four emerging economies in the RE sector. The EEs we focus on are Turkey, India, Brazil, and China. We use data on RE policy initiatives implemented by these countries from the Policies & Measures database by the International Energy Agency (IEA), and RE patents filed by these countries from the International Renewable Energy Agency (IRENA), from the years 2000–2015 to develop our four cases. Based on our case analysis, we classify the innovation focus of EEs into four quadrants: A) Technology replication, B) Innovations primarily in mature technologies, C) Substantial focus on novel technologies D) Significant in­ novations in mature and novel technologies. Our case analysis finds that Turkey, which has relatively few policy measures in the RE sector, is yet to demonstrate significant innovations in any RE technologies and is an example of a country in Quadrant A. India develops innovations in the more mature solar technologies backed by a significant pull policy focus and is an example of countries in Quadrant B. Brazil’s push policy focus has enabled innovations in novel bioenergy technologies and this country is an example for Quad­ rant C. Lastly, China has risen to become an important player in RE, innovating significantly in both mature and novel technologies, sup­ ported by significant push and pull policy intervention. Thus, China is an example of a country in Quadrant D. Our findings have important implications for policy makers. First, we highlight that policy intervention is indeed necessary for stimulating RE innovation in EEs. As seen in the case of the first three countries, despite lagging in RE innovation, these countries have recently started to make strides in innovation because of targeted policy intervention. Second, by showing that different types of policies incentivize firms to focus on different types of technologies, our findings suggest that policy choices by governments have important implications for the technological choices made by firms in their countries. Lastly, our findings suggest that reliance on one type of policy will lead to a focus on limited types of technologies; instead, a mix of different policy instruments can allow organizations to develop a range of different technologies. We also make important contributions to literature. First, we contribute to the age-old debate of whether government intervention is an impediment (Soete, 2007) or an inducement for innovation (Nelson and Langlois, 1983; Nelson and Nelson, 2002; Porter and Van der Linde, 1995) by bringing in the context of EEs to answer this question. While much of the push-pull policy literature has been in the context of the developed world (exceptions: Blind et al., 2017; Padilla-P� erez and Gaudin, 2014) further research is needed to deepen our understanding

of policy in emerging economies (Martin, 2012; Popp, 2019). As EEs rapidly increase their focus on RE (Lam et al., 2017; Perruchas et al., 2019), it is essential to further develop this nascent stream of research. Our paper is a step in this direction of cross-country comparisons of EEs’ policies and energy innovations as called for by recent research (Popp, 2019). Since EEs face institutional failures in addition to the conven­ tional knowledge market failures associated with RE, our findings sug­ gest that the inducement effect of policy on environmental innovation does indeed exist and that targeted policy interventions are critical for alleviating these failures. Second, while much research examines changes in the level of innovation depending on policy initiatives (Martin, 2012), little research has yet examined the impact of hetero­ geneity of policy support on particular types of technologies or in­ novations (exceptions: Lee and Lee, 2013; Nicolli and Vona, 2016). Some recent research in this direction has started investigating the dif­ ferences in innovative outcomes induced by policy (e.g. Hoppmann et al., 2013; Nesta et al., 2014; Perruchas et al., 2019). Our examination of this understudied question and development of the typology of four quadrants highlights that different policies will lead to the development of different types of technological focus - either in novel or mature technologies. The rest of the paper is organized as follows, in Section 2 we establish the theoretical grounding for our study by reviewing literature on policy and innovation with a focus on environmental innovation and then develop our two key propositions. In Section 3, we describe the research design and methodology we adopted to perform our case analyses. In Section 4, we illustrate the findings from our study, followed by a dis­ cussion of our findings in Section 5, and the conclusion and policy im­ plications of our paper in Section 6. 2. Theoretical grounding 2.1. Policy support to foster innovation Extant literature on the role of policy to support innovation has debated whether government intervention is needed because while policy can promote innovation by establishing standards and providing incentives for firms to undertake risky innovation related activities, it can also hinder innovation by creating unfair competition, excessive state control, and bureaucracy (Ashford, 2000; Goh, 2005; Patanakul and Pinto, 2014; Porter, 1998). However, despite this debate, the gen­ eral consensus among scholars is that policy support is essential for environmental innovation (see reviews by Barbieri et al., 2016; Popp, 2019; Popp et al., 2010). Specifically, prior research in the field of environmental innovation has identified market failures as the reason behind the need for policy intervention (Jaffe et al., 2005; Porter and Van der Linde, 1995). This failure arises because free markets do not account for the costs of economic activities, on the eco-system and so­ ciety, into their prices, and consequently do not maximize social wel­ fare. There are two sources of market failure in particular, the first are the negative externalities associated with environmental pollution, and the second are the positive externalities associated with technology innovation (Jaffe et al., 2005). First, harmful side effects (such as pollution) from the use of incumbent, conventional technologies are not priced by markets, thus supporting the use of conventional technologies and discouraging demand for environmentally friendly technologies. The second pertains to knowledge market failures, wherein firms that develop new technologies may not be able to reap all the economic benefits of their investments (due to knowledge spillovers to other firms), thus decreasing the incentives to invest in the development of new technologies. Thus, this ‘double externality’ problem associated with environmental innovation makes policy intervention necessary in order to take into account the goal of social welfare and resolve these market failures. In addition to the above market failures, EEs also witness problems of institutional failure. Firms in these countries are typically latecomers to 2

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the global marketplace because of several hurdles faced at home such as weak institutions (Peng et al., 2008), high market uncertainty (Blind et al., 2017), and a scarcity of resources necessary for technology innovation (Fu et al., 2011). Moreover, they face the challenge of competing in the same technological space as developed economies and catching-up with developed economy firms (Bartlett and Ghoshal, 2000). Thus, policy intervention becomes particularly important in the case of EEs because of the institutional failures in these countries in addition to the already existing market failures associated with envi­ ronmental innovation. Keeping these sources of market and institutional failure in mind, policy intervention can address these failures and consequently “induce innovation” in RE technologies. Intervention can take the form of raising the prices of conventional energy (fossil fuels), reducing costs of RE, mandatory regulations for producers, quality standards, informational resources for consumers, and a host of other ways to alleviate the monetary and knowledge-based failures associated with RE innovation. Early research examining the effect of policy suggested that it merely increased the costs of compliance for firms and consequently was detrimental to firms’ competitiveness (see Jaffe et al., 2005). Contrary to this, other research argued that policy could re-direct firm activities and the loss in competitiveness could be mitigated by the new innovations that firms developed to maintain compliance with said regulations (Porter and Van der Linde, 1995). This idea that policy intervention could encourage and not diminish competitiveness by incentivizing firms to develop new innovations forms the basis of the “induced innovation” mechanism. This idea has been formalized in the “Porter hypothesis” and has formed the basis for much work in the field of environmental innovation (see reviews by Ambec et al., 2013; Barbieri et al., 2016). While the ‘strong’ version of this hypothesis argues that the loss of competitiveness attributed to policy can be completely offset by an increase in innovation performance; there also exists a ‘weak’ version, that argues that policy can certainly induce innovation (regardless of the effect on competi­ tiveness) (Jaffe and Palmer, 1997). There also exists a ‘narrow’ version of this hypothesis that argues that not all policy can induce innovation and that certain types of policies are able to induce innovation and enhance competitiveness depending on the characteristics of the policy (Jaffe and Palmer, 1997). Thus, while the weak and strong hypotheses pertain to the degree or strength of inducement of innovation brought about by policy, the narrow hypothesis pertains to the ‘types’ of inducement brought about differences in policy instruments. Our paper lies in the realm of the narrow version of this hypothesis wherein we examine the differential impact of demand pull versus supply push policies. Demand pull policies resolve the first source of market failure i.e. the problem of environmental externalities by changing prices of conven­ tional technologies. In the case of RE, pull policies do this by incorpo­ rating the environmental costs of conventional energy into the prices for conventional energy to make it more expensive, and/or renewable en­ ergy more cost competitive. Supply push policies resolve the second source of market failure—i.e., the problem of knowledge externalities by encouraging firms to invest in development of new technologies and aiding the adoption of such technologies. In the case of RE, push policies do this by providing direct R&D investments to reduce the risks of un­ certainty for firms working on technologies, by developing technology standards to enhance positive externalities from knowledge spillovers for innovating firms. Demand Pull versus Supply Push Policies. Demand pull policies focus on encouraging innovative efforts of organizations by attempting to stim­ ulate domestic demand in order to increase the size of a market for a particular technology (Edler and Georghiou, 2007; Nemet, 2009). These policies can take the form of tax credits to consumers for the adoption of technologies, as well as the establishment of technology standards and mandates. Pull policies are especially important in EEs where demand may not be as sophisticated as that in developed economies due to

limited purchasing power of the consumers (Prahalad, 2009). In order to stimulate demand, pull policies can make technologies or products more affordable to consumers and thus encourage consumption. Supply push policies refer to policies that reduce the barriers or cost of developing innovations for producers and increase the supply of a particular technology (Nemet, 2009). Push policies provide R&D sup­ port, as well as manufacturing support, through capacity building. Ex­ amples of R&D support includes providing research funding, tax credits to organizations investing in R&D and training and educational in­ stitutions. This is a traditional type of policy support for innovation related activities (Nelson and Langlois, 1983). Push policies can be useful in stimulating innovations in EEs since these policies provide direct support for R&D (Dabi�c et al., 2016). 2.2. Impact of pull versus push policies on innovation Prior studies have found that both pull and push type of intervention can have a positive impact on innovation (Brunnermeier and Cohen, 2003; Kim and Brown, 2019; Lanjouw and Mody, 1996; Peters et al., 2012; Rennings, 2000; Taylor et al., 2005). Here, a significant amount of €hringer et al., 2014; work focuses on either demand pull policies (Bo Crabb and Johnson, 2010; Edler and Georghiou, 2007) or on supply push policies (Blind et al., 2017; Nelson and Langlois, 1983; Wangler, 2013). Since each type of policy, taken individually, cannot explain innovation, it is important to jointly consider demand pull and supply push policies. Accordingly, in recent years, scholars have started to examine the effects of the combination of these policies on innovation (Brem and Voigt, 2009; Cantner et al., 2016; Costantini et al., 2015; Hansen et al., 2017; Palage et al., 2019; Peters et al., 2012). While most of this prior work has focused on how pull and push policies change the level of innovation activity (Martin, 2012), relatively little has been done to compare demand pull versus supply push policies to understand whether innovations in particular types of technologies are bolstered based on the type of policy (exceptions: Lee and Lee, 2013; Nicolli and Vona, 2016). Identified as a research gap first by Martin (2012) and then by Palage et al. (2019), prior research has not addressed the heterogeneity of technologies when examining the impact of de­ mand pull versus supply push policies. In addition, these studies have focused on pull versus push policies in developed economies, where we would expect the institutions which support innovative activities to be more developed than those in EEs and thus the absence of institutional failures as in the case of EEs. To address this gap in the literature, we focus on the different types of technologies that are induced by policy intervention based on the emphasis on pull or push policies in EEs. Technologies differ based on the stock of knowledge accumulated over time. The impact of this knowledge stock is important when examining the impact of policy on innovation (Aghion et al., 2016; Popp, 2002). While innovations may be categorized along various di­ mensions such as originality, radicalness, among others (see review by Squicciarini et al., 2013), our classification relies on the overall consensus on technologies as bodies of knowledge known to be more mature or less mature (i.e. novel) depending on the accumulated stock of knowledge. We focus on mature versus novel technologies because prior research has suggested that the impact of policy on innovation may vary based on the type of technology (Fujii and Managi, 2016; Schmidt and Sewerin, 2018). Drawing on Abernathy and Utterback’s (1978) technology lifecycle perspective, which has been widely adopted (e.g. Foxon et al., 2005; Hoppmann et al., 2013), we define novel technologies as technologies that are emerging in nature and will gradually move towards maturity. Such novel technologies are cutting edge technologies that are recent or new to an industry. These technologies have a potential to lead to the next big paradigm shift (Hung and Chu, 2006) and thus require greater resource commitment (Stringer, 2000). Mature technologies on the other hand have been prevalent in the industry for some time and are well under­ stood by the industry players. Mature technologies tend to be less risky 3

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and more reliable compared to novel technologies (O’Connor and Ver­ yzer, 2001). We argue that demand pull policies are likely to encourage in­ novations in mature technologies because of the following reasons. First, pull policies are designed to resolve problems of market failure because of environmental externalizations and accordingly are designed to stimulate demand for RE technologies. Pull policies are designed to in­ crease market growth and resolve the more ‘urgent/immediate’ need of fulfilling market demand, so firms will take on this opportunity and utilize existing technologies in developing innovations. Further, pull policies enable consumers to choose the most readily available and easily available technologies since the focus is on adoption and use. For instance, pull policies such as renewable energy certificates (RECs) encourage innovation in mature technologies (Nicolli and Vona, 2016), since they are designed to improve the ease of adoption of RE by virtue of being easy to quantify and trade. These are likely to be mature technologies, which are already available in markets. Second, pull policies lead to increase in market growth which in turn reduce exploration pressures on firms and instead incentivize a focus on exploitation (Hoppmann et al., 2013). Exploitation involves the repeated use of existing technologies that are already well understood and well established in markets. Innovations developed by firms doing exploitation are likely to be less radical and more incremental in nature (Malerba, 2009), since they draw from firms’ existing areas of expertise. Demand pull based innovations lead to incremental changes to the technology frontier and not a discontinuous change (Mowery and Rosenberg, 1979; Walsh, 1984) as pull policies work towards improving the applicability of existing knowledge for better fulfilling customer needs. Thus, demand pull policies encourage exploitation in existing i.e. mature technologies. Lastly, countries’ existing capabilities are very likely to drive their future technological choices (Perruchas et al., 2019; Petralia et al., 2017). The initial resource base of EEs is typically in mature technolo­ gies (Lee et al., 2005) because such technologies are likely to be within immediate reach in their local environment. Because EEs face resource constraints in making intense R&D investments necessary for in­ novations in novel technologies, they are likely to have established strengths in well-understood mature technologies. Also, firms within EEs are also likely to work on technologies that are closest to their areas of expertise, which are likely to be mature technologies. Demand pull policies lead to innovations being developed using relatively minimal R&D investments and using applied research (Brem and Voigt, 2009) which is thus especially important in the case of EEs. Further, since these policies encourage adoption of products by markets, they also indirectly encourage firms to engage in mass production of products and achieve economies of scale (Hünteler, 2015). In addition, these policies also help in diffusion of innovations (Di Stefano et al., 2012) and consequently can aid innovations that involve the development of cost-effective produc­ tion processes for existing technologies. Accordingly, we posit:

from their investments in the development of technologies. Specifically with respect to the environment, such policies can assure firms that their investments in environmental innovation will be valued by the market (Porter and Van der Linde, 1995). Push policies generally tend to be technology specific since they are designed to resolve market failures pertaining to specific types of knowledge. For instance, such policies such as public R&D (which are examples of push policies) are likely to encourage innovations in novel technologies (Nicolli and Vona, 2016). Lastly, innovative activities of any kind are characterized by a high degree of uncertainty. Particularly in the case of novel technologies when there are no established dominant designs, undertaking in­ novations can be especially risky. Further, this risk can be compounded d in the case of EEs who are resource constrained, and investing valuable monetary resources into R&D projects for novel technologies may seem highly risky (Petralia et al., 2017) and thus firms in these countries may be reluctant to pursue such technologies. Push policies reduce the un­ certainties associated with R&D and incentivize firms to invest in the ‘risky’ activity of development of novel technologies (albeit motivated by private profit generation motives). Thus push policies help to reduce R&D related uncertainty and thus lead to greater exploration which in turn fosters innovation in novel technologies. Accordingly, based on our classification of mature versus novel technologies, we posit: Proposition 2. Supply push policies in emerging economies will encourage innovation in novel technologies. Table 1 presents the key differences between demand pull and supply push policies which forms the basis of our propositions 1 and 2. 3. Research design and method 3.1. Research setting - renewable energy sector overview The renewable energy sector in emerging economies is an ideal research setting for our paper because of the following reasons that we elaborate below. (1) This sector has seen a wide variety and volume of policy support - especially in emerging economies. (2) Globally, orga­ nizations are engaging in innovations in this sector, and the technologies being developed are a mix of both mature and novel technologies (suggesting that the supporting science and economics are feasible for both types of technologies). (3) Emerging economies are catching-up and competing with developed economies in this sector. We elaborate on these three reasons below. First, countries across the world, including developed and emerging economies, face increasing pressures to reduce their CO2 emissions by reducing dependence on fossil fuels. In response to these pressures, in­ vestments in renewable energy have been increasing rapidly over the years especially in emerging economies.1 However, firms in this industry focus on alternate energy sources that compete with conventionally used fossil fuels. Facing resistance from the other industries that depend on fossil fuels, these firms have weak incentives to invest and innovate in renewable energy and thus government intervention is needed (Noailly and Shestalova, 2017). The importance of policy support in this sector is evident by the total investment made by the government in R&D to the tune of $5 billion in 2014 compared to $7 billion invested in corporate R&D (UNEP, 2015). Further, governments in EEs have used both pull and push policies to provide support to the renewable energy sector. Pull policies, used to encourage adoption and consumption of renewable energy, include mandatory renewable energy targets, renewable energy certificates; and

Proposition 1. Demand pull policies in emerging economies will encourage innovation in mature technologies. Next, we argue that push policies are likely to encourage innovations in novel technologies. First, push policies focus on improving the supply of new products and technologies. Under push type of support, in­ novations are developed (through R&D activities) for the sake of push­ ing the current frontier of knowledge (Walsh, 1984). The need for these innovations does not lie in the fulfillment of market needs but rather in the commercial application of know-how, often scientific and techno­ logical (Dosi, 1982). Since push policies attempt to push forward the technology frontiers by focusing on basic science and technology knowledge, this often results in successful innovations that lead to substantial changes in existing technologies. Second, push policies are designed to resolve knowledge market failures by improving the ability of innovating firms to appropriate gains

1 In 2014, the total annual new global investment in renewable energy was $270.2 billion, a significant increase from $45.1 billion in 2004 (UNEP, 2015). Of this total investment in 2014, $131 billion worth of investment was made by emerging economies (UNEP, 2015).

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Table 1 Summary of findings from relevant literature. Objective Mechanism

Rationale

Focus Impact on technology frontier Critique

Examples Findings

Table 2 Comparison of push versus pull policy instruments for renewable energy sector.

Demand Pull Policies

Supply Push Policies

Encouraging demand for specific technologies. Stimulating consumer demand for a particular technology by increasing the private payoff to successful innovation.

Encouraging supply of specific technologies. Reducing barriers to innovation by increasing supply of a particular technology by reducing private cost of producing innovation. Advances in scientific and technology related knowledge will determine the direction of innovation.

Demand will determine the direction of innovation as changes in market conditions create opportunities to invest in innovation to meet consumers’ unmet needs. Applied research. Incremental changes to technology frontier – incremental in terms of cost reducing and performance enhancing. Leads to incremental changes in technology and discourages discontinuous change ( Mowery and Rosenberg, 1979). Tax credits to consumers, Technology standards and mandates. Have a positive impact on innovation (Crabb and Johnson, 2010; Fabrizio et al., 2017; Peters et al., 2012; Popp, 2002) Pull policies have a negative impact on non-incremental innovations (Nemet, 2009). In mature technologies, demand pull has greater impact on innovation ( Costantini et al., 2015) Pull policies lead to higher exploitation (Hoppmann et al., 2013).

Basic science. Pushes the current frontier of knowledge – avoids technology lock ins.

Demand Pull Policy Instruments

Description

Supply Push Policy Instruments

Description

Mandatory Renewable Energy Targets

Mandates utilities companies to buy energy from RE producers ( Norberg-Bohm, 2000). Regulated performance targets to push consumption of technology ( Hansen et al., 2017; Lewis and Wiser, 2007). Targeted financial incentives for increased adoption of technologies ( Hansen et al., 2017). Subsidies for specific technologies ( Norberg-Bohm, 2000). Indirect support (Lewis and Wiser, 2007). Policies equalizing prices for energy generated using RE and non-RE sources (Hansen et al., 2017).

Public R&D

Consists of public institutions performing publicly funded R&D and industry performing publicly funded R&D (Hansen et al., 2017). Traditional form of support ( Nelson and Langlois, 1983).

Innovative Grants

Grants for project development and loan softening programs (NRC, 2010).

Technology contests

Government procurement

Procurement of renewable energy by state owned enterprises (Lewis and Wiser, 2007).

Technology demonstrations

Public information dissemination

Programs that increase awareness to increase adoption of RE ( Hansen et al., 2017).

Local content requirements

Quality standards

Certification of quality provided by government

Capacity auctions

Feed in Tariffs

Price based measure, direct impact on technology development since they are focused policies (Johnstone et al., 2010). Quantity based measure, indirect incentive for technology development ( Johnstone et al., 2010).

Financial incentives for energy generation firms

Competitions and rewards for successful new technology developments ( Hansen et al., 2017). Programs that include demonstrations of new technology development for encouraging early trials (Hansen et al., 2017). Mandates a percentage of product be manufactured locally. Direct support for local manufacturers ( Lewis and Wiser, 2007). Contracts of RE generation moderated by government; technology specified by government ( IRENA, 2017). Tax benefits for manufacturers. Direct incentives for firms to manufacture the technology (Lewis and Wiser, 2007).

Financial incentives for energy consumers

Ignores changes in economic conditions that impact profitability of the innovation ( Nemet, 2009). Government sponsored R&D, Manufacturing support. Have a positive impact on innovation (Blind et al., 2017; Johnstone et al., 2010; Wangler, 2013).

Favorable pricing policies

Push policies have no effect on innovation (Fabrizio et al., 2017). In less mature technologies, both demand pull and supply push instruments foster innovation (Costantini et al., 2015).

feed-in-tariffs (Norberg-Bohm, 2000). Examples of push policies, used to incentivize domestic innovation and production, include innovation grants, technology competitions, technology demonstrations, low cost loans, favorable custom duties and subsidies for manufacturers (Hansen et al., 2017). Table 2 presents the different types of push and pull policy instruments used in this sector. Second, there has been an increase in innovation coming from this sector (Wangler, 2013). The technologies being developed incorporate a good mix of both novel and incremental innovations across the different sources of renewable energy (Huenteler et al., 2016; Johnstone et al., 2010; Noailly and Shestalova, 2017). The main types of renewable en­ ergy sources are solar energy, wind energy, hydropower, bioenergy, and geothermal energy (IRENA, 2017). Table 3 provides a brief description of each type of renewable energy technology and classifies them as novel or mature technologies. Examples of mature technologies include solar and wind energy sources, while ocean energy is a novel technology (Lewis, 2011; Nicolli and Vona, 2016; Norberg-Bohm, 2000). Other energy sources such as biofuels have a mix of both mature and novel technologies (EPO, 2015; IEA, 2014). Lastly, EEs are catching up with developed economies in the competitive environment of renewable energy sector. The rapid eco­ nomic growth in EEs has led to a growth in demand for energy, partic­ ularly alternative energy. Since the existing installed base of conventional energy generation in these countries is limited, there is little infrastructure needed to be replaced. In addition, there is no need

Tradeable Green Certificates aka Renewable Energy Certificates

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Export assistance

Favorable customs duties and export credit assistance. Direct incentives for firms to manufacture the technology (Lewis and Wiser, 2007).

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to “unlearn” existing technologies unlike the case of developed econo­ mies. Thus, EEs have the potential to technologically leapfrog developed economies (Lee and Lim, 2001) in this sector. Table 3 Classification of renewable energy technology types. Energy type

Description

Technology classification

Geothermal energy

Energy generated from the heat from the earth’s core. Involves the use of heat pumps. Used primarily for heating purposes and not for electricity generation. Photovoltaic cells capture the sun’s radiation in the form of photons and convert it into electricity. PVs are more expensive technology to produce as compared to other grid connected technologies, so their use is limited to offgrid applications. Uses the thermal characteristics of sunlight by capturing the infrared radiation to generate heat. This sector is not growing as fast as the other solar sectors. Uses elements from both photovoltaic and thermal technology. Concentrated solar power that involves the concentration of the sun’s energy to a single point and then create steam from liquids to generate power. Involves use of wind turbines to harness the kinetic energy of wind and generate power.

Mature technology that has been popular since 1900s ( IEA, 2006; IRENA, 2018).

Solar photovoltaic

Solar - thermal

Solar photovoltaic thermal hybrid

Wind energy

Hydropower

Bioenergy power generation

Bioenergy biofuels

Bioenergy - fuels from waste

Ocean energy Cross-cutting technologies

Power is generated from turbines that convert the energy of water flowing from a higher elevation to a lower elevation into electricity. This consists of biodegradable materials left over from agriculture or other plant and animal matter that produces energy upon combustion. This energy can be used for electricity generation. Consists of liquid or gaseous fuels developed from biomass. Examples are biodiesel and bioethanol.

Biodegradable waste materials are burnt using traditional methods as fuel. Inefficient and sometimes polluting. Tides, waves, and currents are used to generate electricity. Technologies that use insights from different established technologies.

3.2. Case selection and data collection We utilized a comparative case analysis methodology to understand the impact of different policy initiatives on innovation. This methodol­ ogy is based on the principle of grounded theory building (Glaser and Strauss, 1967). Case based research is necessary to understand the impact of country level policies on innovation due to high context specificity (Kemp and Pontoglio, 2011). We focused on four EEs and carry out comparative case analyses of the push and pull policies implemented by these countries and the resulting innovations developed. We considered three important factors in selecting the sample of countries for our case studies. The first criterion was to select countries wherein governments support innovation by the local industry in order to witness evidence of policy initiatives that encourage innovation. The second criterion was to select countries that were actively involved in manufacturing and adoption of RE, in the absence of which there would be no possibility of witnessing innovation in RE. Third, following Yin (2017 pp. 93–5) suggestion of selecting a breadth of cases along a set of dimensions to best understand how the dimensions impact the outcome, we selected cases that maximized variation in government policy ini­ tiatives, i.e. selected emerging economies which are different in their use of policy instruments, in order to capture the heterogeneity in govern­ ment RE policies. Based on these criteria we selected four EEs - China, India, Brazil and Turkey - for our case studies. We used secondary data for our case studies. In collecting and analyzing the data for our study, we followed established guidelines to ensure validity and reliability of our data and findings (Riege, 2003; Yin, 2009, 2013). To ensure construct validity, we used multiple sources of evidence. Data on the country’s history and government initiatives in renewable energy was collected from annual reports of organizations such as International Energy Agency (IEA), International Renewable Energy Agency (IRENA) and United Nation Environment Programme (UNEP). We first started by collecting data on the history of the emerging economy in the renewable energy sector, focusing on the key drivers which led to entry in this sector. Next, using the Policies and Measures database developed by the IEA (IEA, 2018), we examined the renewable energy related government policies adopted by the four countries over the years from 2000 to 2013. Using the classification shown in Table 2 (which is based on prior literature), we hand coded each policy as pull or push. We also used additional data from World Development Indicators database (WDI, 2014) as well as prior journal articles on each country (e. g. Lewis and Wiser, 2007; Wang et al., 2010; Zeng et al., 2017) to develop our country profiles. Independent of the data on policies, we also collected data on the innovation output of the four countries in our study. We used patent data specific to the renewable energy sector from IRENA, which compiles longitudinal patent data on all patents filed with the European Patent Office in this sector (IRENA, 2018). The database classifies patents across different energy sources as well as different technologies within each source. This detailed classification enabled us to classify technol­ ogies into mature and novel. The distinction between mature and novel was made based on existing literature (as shown in Table 3). Technol­ ogies that are well established and have been widely adopted were classified as mature technologies while those that are new to the sector were classified as novel technologies. Next, we summed the total mature and novel patents filed by each country over the years from the years 2002–2015. We restricted our analysis to this period because there is a time lag between the time of application of a patent and its official grant and publication, thus patent counts from recent years tend to be under-reported (IRENA, 2018). Further, the two-year lag between our

Mature technology that first started being used since the 1950s (Boyle, 2004).

Mature technology that has been popular since many decades (IEA, 2006; IRENA, 2018). Mature technology but is still expensive (IEA, 2006; IRENA, 2018).

Mature technology (Lewis, 2011; Nicolli and Vona, 2016; Norberg-Bohm, 2000). First windmills for developing electricity developed in 1888 and used successfully since 1920s . Mature and cost competitive technology (EPO, 2015).

Modern forms of bioenergy and integrated bioenergy systems are a novel technology (IEA, 2006).

First generation biofuels are a mature technology (EPO, 2015). Second generation biofuels that are more efficient and ecofriendly are an emerging type and not yet produced commercially (IEA, 2014). Mature technology (IEA, 2006).

Novel technology (IRENA, 2018; Nicolli and Vona, 2016). Novel.

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examination of policy initiatives and patents allows for passage of time to see the impact of policies on innovation activities. Lastly, we also used data from Global Cleantech Innovation Index (GCII) to find the inno­ vation rankings of the countries in our study (GCII, 2017).

capabilities (IEA, 2017). For instance, the country has not yet estab­ lished any legally binding mandatory renewable energy targets. Nor has it undertaken any significant programs to support private R&D. Renewable energy innovations in Turkey. As mentioned above, Turkey has only recently started to focus on the RE sector. The absence of sig­ nificant push or pull policies means that there is no impetus for devel­ oping new innovations. The country ranks 33rd in the Global Cleantech Innovation Index (GCII, 2017). This is among the lowest ranking for developed and emerging economies. The level of innovation related activity in Turkey’s RE sector has been very low. From 2002 to 2015, Turkey filed an average of 33 patents a year in the renewable energy sector. Most of its patent filings are in the solar thermal area which is a mature technology.

3.3. Data analysis Data analysis was an evolving and iterative process. We first created detailed case write-ups for each country based on archival data. Graphs and tables were also created to help us better understand the patent data. The case write-ups were then independently reviewed by all three researchers involved in this study to ensure the internal validity and reliability of the data. Multiple revisions were made to the case writeups based on additional data collected as well as discussions among the authors. Next, we examined the relationship between government policies and types of technology innovation conducted by the four countries. We primarily utilized the detailed case write-ups for this analysis. We then used our findings to develop a two-by-two matrix for the typology of innovations developed by EEs based on the focus of their government policies.

4.2. Case 2: renewable energy sector in India Overview: India started to focus on RE in order to reduce its CO2 emissions and to meet its growing energy demands. India is one of the top five CO2 emitting countries in the world.3 In addition, with an annual population growth rate of 1.58 percent and GDP growth rate of close to 7 percent, India faces severe energy shortage issues to support its growing population and economy (Kumar et al., 2010). In response to these two factors, India ramped up its investment in renewable energy with total investment in this sector of $270 billion in 2014 (UNEP, 2015). Despite India’s investments in this sector, renewable energy only accounts for 4 percent of total energy consumption (Zeng et al., 2017). India’s foray into the RE sector was in the 1960s with the con­ struction of windmills at the National Aeronautical Laboratory (Zeng et al., 2017). Since then, wind energy continues to be the primary source of renewable energy in India. Following the global energy crises of 1970s, the Indian government set up the Commission of Additional Sources of Energy (CASE) in the Department of Sciences and Technology in 1981. CASE was created to develop renewable energy in India. In 1982, Department of Non-Conventional Energy Sources (DNES) was created under the Ministry of Energy to oversee renewable energy. CASE was then absorbed into DNES. In 1992, DNES became separate from Ministry of Energy and was called Ministry of Non-Conventional Energy Sources. Since 2006, this ministry was renamed to Ministry of New and Renewable Energy suggesting a renewed focus on renewable energy. Push-pull policies in India: Government policies in India have pri­ marily focused on demand-pull policies to stimulate adoption of renewable energy. One of the key policy initiatives adopted by the government of India is the Jawaharlal Nehru National Solar Mission (JNNSM) in 2010 which has a target of achieving 100,000 MW by 2022. To achieve this goal, feed-in-tariffs are one of the key instruments used to bring down solar power costs. The government enacted the Electricity Act of 2003 to regulate quotas for mandatory renewable energy for power supply companies. In addition to these national level policies, the government has also developed grassroots level renewable energy initiatives to educate the public and encourage use of renewables. For instance, Akshay Urja Shops (renewable energy shops) were launched across the country to make renewable energy available to the public (Kumar et al., 2010). Other examples of pull policies include: 1) renewable energy parks to encourage domestic capacity building; 2) Rajiv Gandhi Renewable En­ ergy Day (20th August); 3) bi-monthly renewable energy newsletter and renewable energy clubs; and 4) direct subsidies to users of renewable energy sources and devices (Kumar et al., 2010). Thus, the government of India is encouraging the public to use alternative energy sources to meet the energy needs of the country by focusing on the demand side. While the primary focus has been on pull policies, the Indian govern­ ment has also initiated a few push policies in the recent years. For

4. Findings 4.1. Case 1: renewable energy sector in Turkey Overview: As a country with an average GDP growth rate of 3 percent over the last few decades (Yaprak et al., 2018), Turkey is an emerging economy that is transitioning from an agriculture-based economy to a rapidly industrializing economy. Because of this transition and growth, Turkey has seen its energy consumption double in the last few years (IEA, 2017). The country is highly dependent on imported energy as only 24.8 percent of its energy needs were met by domestic energy production in 2015 (IEA, 2017). Efforts to reduce dependence on energy imports combined with greater concerns about air quality2 have led to Turkey’s foray into renewable energy sector. Turkey is a relatively new entrant in the RE sector with only 13 percent of its energy needs met by renewable energy sources (IEA, 2017). The key renewable energy sources are solar, wind, and geothermal (IEA, 2014). The two government institutions in charge of supporting renewable energy sources in Turkey are the Ministry of En­ ergy and Natural Resources (MENR), and the Energy Market Regulatory Authority (ERMA). In 2011, MENR established the General Directorate for Renewable Energy (GRDE) to establish and monitor renewable en­ ergy relative policies. Push-pull policies in Turkey: Turkey has few demand-pull and supplypush policies for renewable energy. So far, the country has done some groundwork by establishing institutions for the development of renew­ able energy but lacks targeted push-pull policies. On the demand-pull side, the Law on the Utilization of Renewable Energy in Electricity Generation (2005) provides the option of directly selling renewable energy in the market or alternatively opting for feed-in tariffs. These steps were taken to make renewable energy cheaper for consumers and thus stimulate demand. At the push side, renewable energy investments are incentivized through the Clean Technology Fund (CTF) loans and Global Environment Facility (GEF) grants. The New Investment In­ centives Programme (2012) also helps provide support to facility building and manufacturing of components for renewable energy gen­ eration. Further, reduced fees are also charged for land acquisition for renewable energy projects. Despite the steps taken so far, Turkey still needs significant policy support to accelerate its renewable energy 2 Turkey’s the CO2 emission (kg per 2010 US GDP) for Turkey was 0.3 (WDI, 2014) which is still very low compared to other emerging economies like China and India. However, its CO2 emission was 141.6 percent greater in 2014 than it was in 1990 (IEA, 2017).

3 CO2 emissions for India, measured as kilograms per GDP, were on average 1.87 during the time frame of 1992–2011(Zeng et al., 2017).

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instance, institutions such as National Institute for Solar Energy, Na­ tional Institute of Wind Energy and Sardar Swaran Singh National Institute of Bio-Energy provide technical and R&D support. Renewable energy innovations in India: The Indian government has focused on capacity building and not on developing cutting edge research facilities (Lewis, 2011). As a result, the innovations developed focus on developing low-cost renewable energy applications to make energy easily accessible and improve connectivity. India ranks 29th in the 2017 Global Cleantech Innovation Index (GCII, 2017). While, the number of patents have grown significantly from zero in 2002 to 222 in 2015, most of these patents are in mature technologies, such as solar and wind energy, as expected based on the focus on demand pull policies.

technology and Brazil seems to be focusing technology development efforts in this area as demonstrated by its bioenergy patents. We do however note a sharp decline in its RE patenting from 237 in 2013 to 69 in 2015, likely owing to recent political tensions. 4.4. Case 4: renewable energy sector in China Overview: China is one of the largest CO2 emitting countries in the world5 and it has also faced severe energy supply shortages because of dependence on fossil fuels (Wang et al., 2010). To address these issues, the Chinese government has adopted an aggressive approach to develop the domestic renewable energy sector. China invested $83.3 billion in renewable energy in 2014 which is a sharp rise compared to $3 billion in 2004 (UNEP, 2015). However, despite the heavy investment as well as strong government support in the renewable energy sector, only 2.22 percent of China’s total energy consumption was from renewable energy sources in 2011 (Zeng et al., 2017). China’s renewable energy development can be broadly divided into four stages (Zeng et al., 2017): Stage 1 (1949–79) was when the renewable energy sector was not active in China. The country started using some wind and solar energy only in the 1970s. Stage 2 (1980–89) was when under the Sixth Five-Year Plan, energy conservation became an important goal. This goal led to the development of sources of hy­ dropower and wind energy. Stage 3 (1990–99) was when China saw further development of hydro and wind energy. Stage 4 (2000 onwards) has seen a renewed focus on alternate energy sources in the country. While hydropower and wind continue to be the important sources of renewable energy, solar energy has become prominent over the past few years, and innovations in ocean energy are recently starting to emerge. Under this fourth stage, China passed the Renewable Energy Law in 2006 to create a framework for regulating renewable energy (Kuriakose, 2017). In addition, under the thirteenth Five-Year Plan for 2016–2020, green (renewable energy) innovation has been identified as a key driver of growth. Push-pull policies in China: China uses both pull and push government policies. Examples of pull policies that support renewable energy in China include the Mandatory Market Share (MMS) which sets targets for power generators and grid companies to source certain percentage of energy from renewable energy sources (Lo, 2014; Norberg-Bohm, 2000). Another pull policy is the Renewable Energy Law of 2006 that mandates that the selling price of renewable energy be established by NDRC. The Chinese government also encourages demand by providing import tax exemptions for foreign made equipment and foreign made parts for domestic power energy generation companies (Zhang et al., 2013). The government encourages consumers to adopt renewable energy sources by providing subsidies to individuals for building and supplies for in­ tegrated PV systems (Lo, 2014). In addition, the government has also established feed-in tariffs and government tendering which promotes government procurement of renewable energy (Lewis and Wiser, 2007). The Chinese government also utilizes several supply-push policies. Specifically, the government provides direct R&D funding for renewable energy and has set up R&D focused state-owned enterprises (IRENA, 2013). Semiconductor Research Institution is an example of a state-owned enterprise that primarily works on solar PV related R&D. In addition to R&D funding, the Chinese government also provides direct capital subsidies, export credits at low rates, export guarantees and in­ surance, financial and tax incentives for local manufacturing and R&D support for domestic producers (Lewis, 2011; Zhang et al., 2013). Renewable energy innovations in China: China has become an impor­ tant player in the innovation of renewable energy in recent years. Ac­ cording to the Global Cleantech Innovation Index of 2017, China ranks 18th on innovation in renewable energy related technologies (GCII,

4.3. Case 3: renewable energy sector in Brazil Overview: The global oil crises of the 1970s prompted Brazil to explore renewable energy sources using its existing resources such as hydropower generation and biofuels using sugarcane-based ethanol.4 In the wake of recent droughts, the country has diversified to other sources such as wind power and newer types of bioenergy (such as secondgeneration biofuels) (Louw, 2013). Today, renewable energy accounts for 45 percent of the total energy supply in Brazil. The country made on an average, annual new investments of $7 billion in renewable energy from 2004 to 2014 (UNEP, 2015). The National Council for Energy Policy (CNPE) is the primary policy making body in the country. Along with the Ministry of Mines and En­ ergy (MME), National Agency of Petroleum, Natural Gas and Biofuels (ANP), and the National Agency for Electrical Energy (ANEEL), these organizations oversee renewable energy policy making and enforce­ ment. In 2002, the Brazilian government established Program to Foster Alternative Sources of Electric Power (PROIFNA) to increase renewable energy from wind, biomass and small hydropower. Push-pull policies in Brazil: Brazil has focused on supply-push policies to increase the role of renewable energy in meeting domestic energy needs. The country has 16 different funds for supporting R&D in renewable energy. For instance, InovaEnergia is a program that provides R&D and financing support to firms that are developing new technology using solar, thermal and wind sources (de Oliveira Gavira, 2014). In addition, the government of Brazil mandates companies to invest a certain proportion of revenues into R&D, for example, utilities in Brazil must invest 0.5 percent of their net revenue in R&D (GlobalData, 2017). Further, the government uses renewable energy auctions as an instru­ ment to determine the short and long-term direction of renewable en­ ergy generation, transmission, and consumption. The government establishes the technology specifications for these auctions, thus deter­ mining which technologies get preference as renewable energy generators. While Brazil does not have many pull policies, the one that has been widely implemented is the mandatory purchase of renewable energy requirement for Electrobras, a state-owned utilities enterprise. The government mandates Electrobras to purchase a percentage of energy through renewable energy to ensure renewable energy consumption. Similarly, through the PROINFA program, the government ensures purchase of biomass, wind, and small hydropower into the national grid. Renewable energy innovations in Brazil: There has been a rapid in­ crease in the number of patents from Brazil from 2002 to 2015 with an average of 455 patents a year. Of these, it filed an average of 16 patents a year in this period in novel renewable energy technologies. A significant number of these patents are in the ocean energy and bioenergy sector. While first generation biofuels are a relatively mature technology in the bioenergy sector, newer second-generation biofuels are a novel 4 Hydroelectricity generated through large hydropower plants contributes to 80 percent of the Brazil’s domestic energy production (IEA, 2017). Brazil is also the largest exporter of ethanol in the world today.

5 The CO2 emission (kg per 2005 US GDP) was 2.13 for China with an average CO2 emission of 2.73 between 1992 and 2011 (Zeng et al., 2017).

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2017). In 2002, China had 1536 renewable energy related patents but by 2015 this number has increased to 19,430. The country has a significant volume of patents in both novel and mature technologies. Of all patents filed by China from 2002 to 2015 in RE, the percentage of patents that are in novel technologies has been rising from 1.3 percent in 2002 to 4.2 percent in 2015.

stronger impact on innovation in future years. 5. Discussion Our analysis of the four case studies provides support to our propo­ sitions 1 and 2, that the different types of government policies (demand pull versus supply push) can have an impact on the type of technologies developed in the country (mature versus novel technologies). Based on our findings, we develop a two-by-two matrix framework at the country level to classifying innovations developed by EEs into four categories, Specifically, we posit that different country governments adopt different levels of pull and push policies which drive the differences in the type of technologies developed in an emerging economy (see Fig. 2).

4.5. Comparative analysis of cases Comparing the four countries in terms of their policy focus (see Table 4), we find that all four have very different emphasis. Based on our coding of policies introduced and implemented between 2000 and 2013, Turkey, which is the most recent entrant in the renewable energy sector, has only five major policies. Two of these policies are primarily pull and two are push policies, with one having elements of both push and pull. In comparison, China, which has the highest number of policies during the same time period, has 92 new renewable energy policies. Of these, 26 are primarily push based, 24 are pull based, and 9 are general policies pertaining to the strategic plan for renewable energy for the country. As evinced by the number of pull and push policies introduced, China places equal emphasis on both types of policy instruments. India intro­ duced 11 new pull policies and 6 push policies during this time period while Brazil introduced 2 pull and 7 push policies. We were unable to access data on the scale of each policy and thus are limited to the count of policies that were introduced. However, a count of these policies gives us a better understanding of the policy focus of these four countries. In Fig. 1, comparing their patenting activities, we see that Turkey and India have relatively low volume of patenting during 2002–2015 with 461 and 1450 total patents respectively while China has the highest with 159,210 patents and Brazil has 6382 patents. As can be seen, Turkey has few push-pull policies and also fewer patents while China has the most policies and the most patents in this sector. In terms of patents in novel technologies, while Turkey and India seem to have wide fluc­ tuation in the types of technologies they patent in, Brazil and China are more consistent. China has the highest number of novel technology patents with 5163; Brazil has 225, while India and Turkey have 59 and 38 novel patents respectively. This suggests that countries that have higher supply push policies, as in the case of China and Brazil, have more innovation in novel technologies. Since, EEs are increasingly imple­ menting policies in the renewable energy sector we can expect to see a

5.1. Quadrant A: technology replication (low demand pull and supply push policies) In EEs where pull and push policies are weak, there is little incentive for organizations to engage in innovation. Policies that incentivize consumption of new technologies are absent, as is R&D support received for organizations to develop new technologies. In this scenario, patentable innovations will be few as organizations will primarily focus on replicating existing solutions from developed economies. Patents filed, if any, will focus on low cost solutions in mature technologies. Turkey is an example of a country in this quadrant. Most EEs will start off in this quadrant. As the policy focus shifts to technology develop­ ment, we expect the country to gradually transition out from this quadrant. 5.2. Quadrant B: innovations primarily in mature technologies (focus on demand pull policies) Emerging economies wherein the policy focus is primarily on encouraging domestic demand will fall under this quadrant. As there is some government support, countries in this quadrant will engage in developing innovations. However, because of greater emphasis on ful­ filling consumer demand, organizations will focus primarily on in­ novations in technologies that cater to the needs of the local market. Since emerging economies are behind the technology frontier, con­ sumers can easily access mature technologies as compared to novel

Table 4 Summary of country cases – Policy comparisons. Quadrant A - Turkey Pull instruments used in policy mix

a b c d

Mandatory RE targets Feed-in tariffs Quality certification Financial and tax benefits to consumers e Government procurement Push instruments used a Local content requirements in policy mix b Financial and tax benefits to local manufacturers c R&D funding d State-owned enterprises doing R&D e Direct capital subsidies f Capacity auctions g R&D demonstrations Most widely used policy instrument

✓

Started since 2011

Quadrant B - India

Quadrant C – Brazil

Quadrant D - China

✓ ✓ ✓ ✓

✓ ✓

✓ ✓ ✓ ✓

For solar since 2010 ✓

For wind since 2002 ✓

✓ For wind since 1997 ✓

✓

✓ ✓

✓ ✓

✓ ✓

✓ ✓ ✓ Feed in tariffs

Total no. of push policies (2000–2013) Total no. of pull policies (2000–2013) Technology focus of policies

2 2 Hydropower

Tax benefits, feed-in tariffs 6 11 Solar energy

Primary objective of policies

Energy efficiency; import substitution

Energy access, capacity building

9

Capacity auctions 7 2 Bioenergy, Wind energy Energy affordability, reducing dependence on hydropower

26 24 Solar energy; Exploring tidal energy Capacity building, self sufficiency

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Fig. 1. Summary of country cases – Patenting comparison.

5.4. Quadrant D: significant innovations in mature and novel technologies (high demand pull and supply push policies) Some EEs use a two-prong approach where policy stimulates market demand through demand pull policies as well as encourages domestic manufacturing and R&D through supply push policies. The combination of support will encourage the development of both mature and novel technologies and accordingly, countries will demonstrate significant patenting in both types of technologies. Overall, emerging economies in this quadrant, which includes China from our case study, are at an equal or near equal footing—in terms of type and volume of innovation—with developed countries because of the two-prong policy approach. These innovations also have the potential to be subsequently adopted in developed economies too.

Fig. 2. Matrix of typology of innovations developed by emerging economies.

6. Conclusion & policy implications

technologies. Accordingly, the innovation focus will also be on mature technologies. Further, since supply push policies are few, there is no direct encouragement for new technology development and as a result, innovation in novel technologies will be at low levels. India is an example of a country in this quadrant.

In this paper we were driven by the question: do specific types of policy intervention encourage specific types of technology innovations? We showed how differences in policy support lead to differences in innovation in mature versus novel technologies. Building on prior literature and findings from our four case studies, we developed a twoby-two matrix framework of four types of innovation that EEs engage in. While each of our four EEs fit in one quadrant based on their level of demand pull and supply push policies, we expect to see these countries evolve because of changes in government policies. We expect Turkey, which is in Quadrant A to move towards Quadrant B or Quadrant C, as more targeted policies are initiated. Since government resources are limited, we do not expect Turkey to move directly to Quadrant D. We also expect EEs in Quadrant B and Quadrant C, which in our case are India and Brazil, to eventually move to Quadrant D as the government increases their support and adopts a balanced approach for supporting innovation. As policies are expected to evolve, we expect innovation to shift from being in predominately mature technologies to an increasing emphasis on novel technologies. Finally, as seen in the case of China, the wide variety of both pull and push policies in effect have led to the country’s rise as a leader in RE technology innovation. These findings have significant policy implications. Our findings can serve as guidelines for EE governments that plan to support innovation at home. We show how governments’ implementation of a particular type of policy over another can have a differential impact on the nature

5.3. Quadrant C: substantial focus on novel technologies (focus on supply push policies) Countries in this quadrant rely on push policies that support indus­ trial development through innovation related activities. As this is a more direct approach to supporting innovation, EEs in Quadrant C will have higher level of innovation activity compared to countries in Quadrant A or B. Government policies are geared towards providing R&D funding and developing university-industry linkages, and as a result there will be higher levels of innovation in novel technologies. Here, we note that by definition, novel technologies are harder to develop successful in­ novations in, as compared to mature technologies. Further, policy sup­ port is unlikely to be totally devoid of any pull instruments. Accordingly, the majority of innovations will still be in mature technologies. Still a significantly higher proportion of novel technology innovations will be seen in these countries as compared to those in Quadrant B. Brazil is an example of a country in this quadrant. As compared to Turkey and India, there is substantial patenting in novel technologies.

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of innovation. This is an especially important consideration in today’s globalized world, where technology-based competition is key to achieving global competitive advantage. However, innovations in mature, well-understood technologies require a different set of capa­ bilities than innovations in novel, emerging technologies. Thus, we recommend that governments looking to encourage innovation in mature technologies - which are less risky - should focus on pull policies, while those looking to take more risks should encourage innovation in novel technologies through push policies. Further, we assure EE gov­ ernments about the important role that policy plays in stimulating environmental innovation. As environmentally conscious economic ac­ tivities become more and more urgent, government policy can be an effective tool to influence EE firms to make efforts in the direction of RE technologies. Overall, our findings contribute to prior research which has debated whether policy is an inducement or an impediment to innovation. Our findings from the case studies suggest that government policies are indeed effective in stimulating innovation, especially in the context of emerging economies. In addition, our paper adds to the few policy related studies in the context of EEs that have focused on either demand pull or supply push policies. We jointly examine both these two types of government policies and show how the difference in government pol­ icies implemented (pull versus push) can impact not just the level of innovation activity but can also induce specific types of innovation (mature versus novel technologies). While our paper makes many contributions, we do have a few limi­ tations that provide opportunities for further research. First, we rely on observations from past research (e.g. Boyle, 2004; Lewis, 2011; Nicolli and Vona, 2016; Norberg-Bohm, 2000), and categorize RE technologies on the whole as being mature or novel. We do recognize that opportu­ nities for breakthrough innovations may exist in mature technologies, and incremental innovations in novel technologies are also possible. Thus, there are differences between individual innovations within technologies. Future research can breakdown the different dimensions of technologies and utilize the data available in patents for further examining the characteristics of these technologies. Second, because we use case study methodology, our sample size is limited. Quantitative statistical analysis may be needed to examine the different types of policies and the resulting innovation outcomes across different emerging economies. Third, we focus our examination on only one sector, i.e. renewable energy. Research is also needed to examine if our findings can be translated to other R&D intensive industries such as the bio-pharmaceutical and semiconductors industries which also face substantial policy intervention. As RE innovation in EEs is still a relatively new research area, there are several future research avenues to build on our findings. In addition to examining country level variation in innovation, it is also important to examine intra country variation in innovation levels and types because the effect of policy on innovation may vary depending on in­ dustry specific and regional factors. Further, because of the added challenge of institutional failures faced by EEs, we expect that the inducement effect of policy on innovation may be even stronger in the case of EEs than that in the case of DEs. Future research comparing the impact of policy on innovations in EEs versus DEs can identify the relative strength of this effect. This can also deepen our understanding of the nature of institutional failures in these countries and the ways in which policy can address these failures.

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Declaration of competing interest The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

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