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Competing Recombinant Technologies for Environmental Innovation: Extending Arthur's Model of Lock-In

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Author Info

  • Paolo Zeppini
  • Jeroen C. J. M. van den Bergh

Abstract

This article presents a model of sequential decisions about investments in environmentally dirty and clean technologies, which extends the path-dependence framework of B. Arthur (1989, Competing technologies, increasing returns, and lock-in by historical events, The Economic Journal, 99, pp. 116-131). This allows us to evaluate if and how an economy locked into a dirty technology can be unlocked and move towards clean technology. The main extension involves the inclusion of the effect of recombinant innovation of the two technologies. A mechanism of endogenous competition is described involving a positive externality of increasing returns to investment which are counterbalanced by recombinant innovation. We determine conditions under which lock-in can be avoided or escaped. A second extension is “symmetry breaking” of the system due to the introduction of an environmental policy that charges a price for polluting. A final extension adds a cost of environmental policy in the form of lower returns on investment implemented through a growth-depressing factor. We compare cumulative pollution under different scenarios, so that we can evaluate the combination of environmental regulation and recombinant innovation.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Industry and Innovation.

Volume (Year): 18 (2011)
Issue (Month): 3 ()
Pages: 317-334

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Handle: RePEc:taf:indinn:v:18:y:2011:i:3:p:317-334

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Related research

Keywords: Externalities; hybrid technology; lock-in; R&D; sequential decisions;

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Cited by:
  1. Markard, Jochen & Raven, Rob & Truffer, Bernhard, 2012. "Sustainability transitions: An emerging field of research and its prospects," Research Policy, Elsevier, vol. 41(6), pages 955-967.
  2. Lopolito, A. & Morone, P. & Taylor, R., 2013. "Emerging innovation niches: An agent based model," Research Policy, Elsevier, vol. 42(6), pages 1225-1238.
  3. Zeppini Rossi, P., 2013. "A Discrete Choice Model of Transitions to Sustainable Technologies," CeNDEF Working Papers 13-11, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  4. Koen Frenken & Luis R. Izquierdo & Paolo Zeppini, 2012. "Recombinant Innovation and Endogenous Transitions," Eindhoven Center for Innovation Studies (ECIS) working paper series, Eindhoven Center for Innovation Studies (ECIS) 12-01, Eindhoven Center for Innovation Studies (ECIS), revised Jan 2012.
  5. Timothy J. Foxon & Jonathan K�hler & Jonathan Michie & Christine Oughton, 2013. "Towards a new complexity economics for sustainability," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 37(1), pages 187-208.
  6. Safarzyńska, Karolina & Frenken, Koen & van den Bergh, Jeroen C.J.M., 2012. "Evolutionary theorizing and modeling of sustainability transitions," Research Policy, Elsevier, vol. 41(6), pages 1011-1024.
  7. Jeroen Bergh & Giorgos Kallis, 2013. "A survey of evolutionary policy: normative and positive dimensions," Journal of Bioeconomics, Springer, Springer, vol. 15(3), pages 281-303, October.

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