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Enabling diffusion: How complementary inputs moderate the response to environmental policy

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  • Fabrizio, Kira R.
  • Hawn, Olga

Abstract

While policies encouraging diffusion of new technologies provide incentives for adopting the focal good, they typically ignore the ecosystem of complementary goods and services. Based on existing literature on indirect network effects, we argue that when there is less availability of complementary goods, policies have a smaller impact on diffusion. Using a natural experiment based on the establishment of state-level solar carve-out policies, we demonstrate that solar power installations increased substantially more after the policy in cities where a critical complementary good – qualified installers – was more available.

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  • Fabrizio, Kira R. & Hawn, Olga, 2013. "Enabling diffusion: How complementary inputs moderate the response to environmental policy," Research Policy, Elsevier, vol. 42(5), pages 1099-1111.
    • Handle: RePEc:eee:respol:v:42:y:2013:i:5:p:1099-1111
    DOI: 10.1016/j.respol.2013.02.003
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    18. Claussen, Jörg & Essling, Christian & Kretschmer, Tobias, 2015. "When less can be more – Setting technology levels in complementary goods markets," Research Policy, Elsevier, vol. 44(2), pages 328-339.
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    20. Lee, Minhyun & Hong, Taehoon & Yoo, Hyunji & Koo, Choongwan & Kim, Jimin & Jeong, Kwangbok & Jeong, Jaewook & Ji, Changyoon, 2017. "Establishment of a base price for the Solar Renewable Energy Credit (SREC) from the perspective of residents and state governments in the United States," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 1066-1080.

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    More about this item

    Keywords

    Diffusion processes; Complements; Strategy; Externalities; Government policy; Electric utilities;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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