Dilution of innovation utility, reinforcing the reluctance towards the new: An upstream supplier perspective on a fragmented electricity industry

This paper inquires into how a reorganization of the value chain running from client-utilities to equipment suppliers within the electricity industry has altered the conditions for diffusing/adopting technological innovation. Through an interview-based qualitative case study of the development and diffusion of high-voltage switchgear, it provides a supplier perspective on how the downstream capacity to recognize and assess the potential value of innovations has fared in the face of downsized utility organizations, seeking to cut costs through aggressive outsourcing of engineering, procurement and construction activities. Highlighting how relations between end-clients and upstream suppliers – following a strategic orientation towards activities considered to be core – increasingly have become mediated by consultants and project-based contractors, the narrative analysis first suggests that this has stolen the industry of important inter-organizational learning processes. This in ways that have reduced the ‘absorptive capacity’ of the utilities sector. Second, the analysis suggests that the contractual form that has come to dominate infrastructure projects further works to de-incentivize the adoption of new technology, by diluting the perceived utility of innovation across the array of actors populating the value chain. Thirdly, the paper calls for renewed policy measures to deal with this reinforced reluctance towards the new.