IDEAS home Printed from https://ideas.repec.org/p/diw/diwwpp/dp1601.html
   My bibliography  Save this paper

The Valley of Death, the Technology Pork Barrel, and Public Support for Large Demonstration Projects

Author

Listed:
  • Gregory F. Nemet
  • Martina Kraus
  • Vera Zipperer

Abstract

Moving non-incremental innovations from the pilot scale to full commercial scale raises questions about the need and implementation of public support. Heuristics from the literature put policy makers in a dilemma between addressing a market failure and acknowledging a government failure: incentives for private investments in large scale demonstrations are weak (the valley of death) but the track record of governance in large demonstration projects is poor (the technology pork barrel). We reassess these arguments in the literature, particularly as to how they apply to sup- porting demonstration projects for decarbonizing industry. Conditions for the valley of death exist with: low appropriability, large chunky investments, unproven reliability, and uncertain future markets. We build a data set of 511 demonstration projects in nine technology areas and code characteristics for each project, including timing, motivations, and scale. We argue that the literature and the results from the case studies have five main implications for policy makers in making decisions about demonstration support. Policy makers should consider: 1) prioritizing learning, 2) iterative upscaling, 3) private sector engagement, 4) broad knowledge dissemination, and 5) making demand pull robust.

Suggested Citation

  • Gregory F. Nemet & Martina Kraus & Vera Zipperer, 2016. "The Valley of Death, the Technology Pork Barrel, and Public Support for Large Demonstration Projects," Discussion Papers of DIW Berlin 1601, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp1601
    as

    Download full text from publisher

    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.540709.de/dp1601.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Sahal, Devendra, 1985. "Technological guideposts and innovation avenues," Research Policy, Elsevier, vol. 14(2), pages 61-82, April.
    2. Hendry, Chris & Harborne, Paul & Brown, James, 2010. "So what do innovating companies really get from publicly funded demonstration projects and trials? innovation lessons from solar photovoltaics and wind," Energy Policy, Elsevier, vol. 38(8), pages 4507-4519, August.
    3. Hendry, Chris & Harborne, Paul, 2011. "Changing the view of wind power development: More than "bricolage"," Research Policy, Elsevier, vol. 40(5), pages 778-789, June.
    4. Hall, Bronwyn H. & Mairesse, Jacques & Mohnen, Pierre, 2010. "Measuring the Returns to R&D," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 1033-1082, Elsevier.
    5. Weyant, John P., 2011. "Accelerating the development and diffusion of new energy technologies: Beyond the "valley of death"," Energy Economics, Elsevier, vol. 33(4), pages 674-682, July.
    6. Giovanni Dosi & Luigi Marengo & Corrado Pasquali, 2010. "How Much Should Society Fuel the Greed of Innovators? On the Relations between Appropriability, Opportunities and Rates of Innovation," Chapters, in: Riccardo Viale & Henry Etzkowitz (ed.), The Capitalization of Knowledge, chapter 4, Edward Elgar Publishing.
    7. Shouro Dasgupta & Enrica De Cian & Elena Verdolini, 2016. "The Political Economy of Energy Innovation," Working Papers 2016.35, Fondazione Eni Enrico Mattei.
    8. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87, World Scientific Publishing Co. Pte. Ltd..
    9. Stewart Russell & Nils Markusson & Vivian Scott, 2012. "What will CCS demonstrations demonstrate?," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 17(6), pages 651-668, August.
    10. Kingsley, Gordon & Bozeman, Barrt & Coker, Karen, 1996. "Technology transfer and absorption: an 'R & D value-mapping' approach to evaluation," Research Policy, Elsevier, vol. 25(6), pages 967-995, September.
    11. Cappelli, Riccardo & Czarnitzki, Dirk & Kraft, Kornelius, 2014. "Sources of spillovers for imitation and innovation," Research Policy, Elsevier, vol. 43(1), pages 115-120.
    12. Carlsson, B & Stankiewicz, R, 1991. "On the Nature, Function and Composition of Technological Systems," Journal of Evolutionary Economics, Springer, vol. 1(2), pages 93-118, April.
    13. Bednyagin, Denis & Gnansounou, Edgard, 2012. "Estimating spillover benefits of large R&D projects: Application of real options modelling approach to the case of thermonuclear fusion R&D programme," Energy Policy, Elsevier, vol. 41(C), pages 269-279.
    14. Anadon, Laura Diaz & Baker, Erin & Bosetti, Valentina & Reis, Lara Aleluia, 2016. "Too Early to Pick Winners: Disagreement across Experts Implies the Need to Diversify R&D Investment," MITP: Mitigation, Innovation and Transformation Pathways 232924, Fondazione Eni Enrico Mattei (FEEM).
    15. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
    16. David M. Reiner, 2016. "Learning through a portfolio of carbon capture and storage demonstration projects," Nature Energy, Nature, vol. 1(1), pages 1-7, January.
    17. Peters, Michael & Schneider, Malte & Griesshaber, Tobias & Hoffmann, Volker H., 2012. "The impact of technology-push and demand-pull policies on technical change – Does the locus of policies matter?," Research Policy, Elsevier, vol. 41(8), pages 1296-1308.
    18. Verhoeven, Dennis & Bakker, Jurriën & Veugelers, Reinhilde, 2016. "Measuring technological novelty with patent-based indicators," Research Policy, Elsevier, vol. 45(3), pages 707-723.
    19. Simon Shackley & Michael Thompson, 2012. "Lost in the mix: will the technologies of carbon dioxide capture and storage provide us with a breathing space as we strive to make the transition from fossil fuels to renewables?," Climatic Change, Springer, vol. 110(1), pages 101-121, January.
    20. Nemet, Gregory F., 2010. "Robust incentives and the design of a climate change governance regime," Energy Policy, Elsevier, vol. 38(11), pages 7216-7225, November.
    21. Johan Schot & Laur Kanger & Geert Verbong, 2016. "The roles of users in shaping transitions to new energy systems," Nature Energy, Nature, vol. 1(5), pages 1-7, May.
    22. Veugelers, Reinhilde, 2012. "Which policy instruments to induce clean innovating?," Research Policy, Elsevier, vol. 41(10), pages 1770-1778.
    23. Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December.
    24. Mowery, David & Rosenberg, Nathan, 1993. "The influence of market demand upon innovation: A critical review of some recent empirical studies," Research Policy, Elsevier, vol. 22(2), pages 107-108, April.
    25. Arthur, W. Brian, 2007. "The structure of invention," Research Policy, Elsevier, vol. 36(2), pages 274-287, March.
    26. Assar Lindbeck, 1981. "Industrial Policy as an Issue in the Economic Environment," The World Economy, Wiley Blackwell, vol. 4(4), pages 391-406, December.
    27. Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2005. "A tale of two market failures: Technology and environmental policy," Ecological Economics, Elsevier, vol. 54(2-3), pages 164-174, August.
    28. Iyer, Gokul & Hultman, Nathan & Eom, Jiyong & McJeon, Haewon & Patel, Pralit & Clarke, Leon, 2015. "Diffusion of low-carbon technologies and the feasibility of long-term climate targets," Technological Forecasting and Social Change, Elsevier, vol. 90(PA), pages 103-118.
    29. Nemet, Gregory F., 2009. "Demand-pull, technology-push, and government-led incentives for non-incremental technical change," Research Policy, Elsevier, vol. 38(5), pages 700-709, June.
    30. Cohen, Wesley M. & Goto, Akira & Nagata, Akiya & Nelson, Richard R. & Walsh, John P., 2002. "R&D spillovers, patents and the incentives to innovate in Japan and the United States," Research Policy, Elsevier, vol. 31(8-9), pages 1349-1367, December.
    31. Gregory Nemet & Erin Baker & Bob Barron & Samuel Harms, 2015. "Characterizing the effects of policy instruments on the future costs of carbon capture for coal power plants," Climatic Change, Springer, vol. 133(2), pages 155-168, November.
    32. Scherer, F. M. & Harhoff, Dietmar, 2000. "Technology policy for a world of skew-distributed outcomes," Research Policy, Elsevier, vol. 29(4-5), pages 559-566, April.
    33. Anna, Petrenko, 2016. "Мaркування готової продукції як складова частина інформаційного забезпечення маркетингової діяльності підприємств овочепродуктового підкомплексу," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 2(1), March.
    34. Aleksandar Zaklan & Jan Abrell & Anne Neumann, 2011. "Stationarity Changes in Long-Run Fossil Resource Prices: Evidence from Persistence Break Testing," Discussion Papers of DIW Berlin 1152, DIW Berlin, German Institute for Economic Research.
    35. Daniel L. Sanchez & Daniel M. Kammen, 2016. "A commercialization strategy for carbon-negative energy," Nature Energy, Nature, vol. 1(1), pages 1-4, January.
    36. Christopher F Baum, 2008. "Stata tip 63: Modeling proportions," Stata Journal, StataCorp LP, vol. 8(2), pages 299-303, June.
    37. Shouro Dasgupta & Enrica De Cian & Elena Verdolini, 2016. "The Political Economy of Energy Innovation," Working Papers 2016.35, Fondazione Eni Enrico Mattei.
    38. Dominique Finon, 2012. "Efficiency of policy instruments for CCS deployment," Climate Policy, Taylor & Francis Journals, vol. 12(2), pages 237-254, March.
    39. Markusson, Nils & Kern, Florian & Watson, Jim & Arapostathis, Stathis & Chalmers, Hannah & Ghaleigh, Navraj & Heptonstall, Philip & Pearson, Peter & Rossati, David & Russell, Stewart, 2012. "A socio-technical framework for assessing the viability of carbon capture and storage technology," Technological Forecasting and Social Change, Elsevier, vol. 79(5), pages 903-918.
    40. Garud, Raghu & Karnoe, Peter, 2003. "Bricolage versus breakthrough: distributed and embedded agency in technology entrepreneurship," Research Policy, Elsevier, vol. 32(2), pages 277-300, February.
    41. Wilson, Charlie, 2012. "Up-scaling, formative phases, and learning in the historical diffusion of energy technologies," Energy Policy, Elsevier, vol. 50(C), pages 81-94.
    42. Usher, Will & Strachan, Neil, 2013. "An expert elicitation of climate, energy and economic uncertainties," Energy Policy, Elsevier, vol. 61(C), pages 811-821.
    43. Schmookler, Jacob, 1962. "Economic Sources of Inventive Activity," The Journal of Economic History, Cambridge University Press, vol. 22(1), pages 1-20, March.
    44. Harborne, Paul & Hendry, Chris, 2009. "Pathways to commercial wind power in the US, Europe and Japan: The role of demonstration projects and field trials in the innovation process," Energy Policy, Elsevier, vol. 37(9), pages 3580-3595, September.
    45. Gregory F. Nemet & Peter Braden & Ed Cubero & Bickey Rimal, 2014. "Four decades of multiyear targets in energy policy: aspirations or credible commitments?," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 3(5), pages 522-533, September.
    46. Karlsson, Rasmus, 2016. "Après Paris: Breakthrough innovation as the primary moral obligation of rich countries," Environmental Science & Policy, Elsevier, vol. 63(C), pages 170-176.
    47. Karsten Neuhoff & Andrzej Ancygier & Jean-Pierre Ponssard & Philippe Quirion & Nagore Sabio & Oliver Sartor & Misato Sato & Anne Schopp, 2015. "Modernization and Innovation in the Materials Sector: Lessons from Steel and Cement," DIW Economic Bulletin, DIW Berlin, German Institute for Economic Research, vol. 5(28/29), pages 387-395.
    48. Bleda, Mercedes & del Río, Pablo, 2013. "The market failure and the systemic failure rationales in technological innovation systems," Research Policy, Elsevier, vol. 42(5), pages 1039-1052.
    49. Giada Di Stefano & Alfonso Gambardella & Gianmario Verona, 2012. "Technology Push and Demand Pull Perspectives in Innovation Studies: Current Findings and Future Research Directions," Post-Print hal-00696607, HAL.
    50. Jeffrey A. Krautkraemer, 1998. "Nonrenewable Resource Scarcity," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2065-2107, December.
    51. David M. Reiner, 2015. "Where can I go to see one? Risk communications for an 'imaginary technology'," Journal of Risk Research, Taylor & Francis Journals, vol. 18(6), pages 710-713, June.
    52. Herzog, Howard J., 2011. "Scaling up carbon dioxide capture and storage: From megatons to gigatons," Energy Economics, Elsevier, vol. 33(4), pages 597-604, July.
    53. Leoncini, Riccardo, 2016. "Learning-by-failing. An empirical exercise on CIS data," Research Policy, Elsevier, vol. 45(2), pages 376-386.
    54. Di Stefano, Giada & Gambardella, Alfonso & Verona, Gianmario, 2012. "Technology push and demand pull perspectives in innovation studies: Current findings and future research directions," Research Policy, Elsevier, vol. 41(8), pages 1283-1295.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yan, Hong-Bin & Li, Ming, 2022. "Consumer demand based recombinant search for idea generation," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    2. Rogge, Karoline S. & Schleich, Joachim, 2018. "Do policy mix characteristics matter for low-carbon innovation? A survey-based exploration of renewable power generation technologies in Germany," Research Policy, Elsevier, vol. 47(9), pages 1639-1654.
    3. Hoppmann, Joern & Peters, Michael & Schneider, Malte & Hoffmann, Volker H., 2013. "The two faces of market support—How deployment policies affect technological exploration and exploitation in the solar photovoltaic industry," Research Policy, Elsevier, vol. 42(4), pages 989-1003.
    4. Bossink, Bart, 2020. "Learning strategies in sustainable energy demonstration projects: What organizations learn from sustainable energy demonstrations," Renewable and Sustainable Energy Reviews, Elsevier, vol. 131(C).
    5. Bento, Nuno & Fontes, Margarida, 2015. "The construction of a new technological innovation system in a follower country: Wind energy in Portugal," Technological Forecasting and Social Change, Elsevier, vol. 99(C), pages 197-210.
    6. Hötte, Kerstin, 2023. "Demand-pull, technology-push, and the direction of technological change," Research Policy, Elsevier, vol. 52(5).
    7. Hellsmark, Hans & Frishammar, Johan & Söderholm, Patrik & Ylinenpää, Håkan, 2016. "The role of pilot and demonstration plants in technology development and innovation policy," Research Policy, Elsevier, vol. 45(9), pages 1743-1761.
    8. Antonelli, Cristiano & Gehringer, Agnieszka, 2015. "Knowledge externalities and demand pull: The European evidence," Economic Systems, Elsevier, vol. 39(4), pages 608-631.
    9. Marisa Beck, Randall Wigle, 2014. "Carbon Revenue: Recycling versus Technological Incentives," LCERPA Working Papers 0079, Laurier Centre for Economic Research and Policy Analysis, revised 13 Jan 2014.
    10. Dosi, Giovanni & Nelson, Richard R., 2010. "Technical Change and Industrial Dynamics as Evolutionary Processes," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 51-127, Elsevier.
    11. Samant, Shantala & Thakur-Wernz, Pooja & Hatfield, Donald E., 2020. "Does the focus of renewable energy policy impact the nature of innovation? Evidence from emerging economies," Energy Policy, Elsevier, vol. 137(C).
    12. Huenteler, Joern & Ossenbrink, Jan & Schmidt, Tobias S. & Hoffmann, Volker H., 2016. "How a product’s design hierarchy shapes the evolution of technological knowledge—Evidence from patent-citation networks in wind power," Research Policy, Elsevier, vol. 45(6), pages 1195-1217.
    13. Karoline S. Rogge & Elisabeth Dütschke, 2017. "Exploring Perceptions of the Credibility of Policy Mixes: The Case of German Manufacturers of Renewable Power Generation Technologies," SPRU Working Paper Series 2017-23, SPRU - Science Policy Research Unit, University of Sussex Business School.
    14. Cantner, Uwe & Graf, Holger & Herrmann, Johannes & Kalthaus, Martin, 2016. "Inventor networks in renewable energies: The influence of the policy mix in Germany," Research Policy, Elsevier, vol. 45(6), pages 1165-1184.
    15. Sam Aflaki & Syed Abul Basher & Andrea Masini, 2015. "Does Economic Growth Matter? Technology-Push, Demand-Pull and Endogenous Drivers of Innovation in the Renewable Energy Industry," Working Papers hal-02011423, HAL.
    16. Cecere, Grazia & Martinelli, Arianna, 2017. "Drivers of knowledge accumulation in electronic waste management: An analysis of publication data," Research Policy, Elsevier, vol. 46(5), pages 925-938.
    17. Dawid, Herbert & Pellegrino, Gabriele & Vivarelli, Marco, 2017. "Is the demand-pull driver equally crucial for product vs process innovation?," MERIT Working Papers 2017-035, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    18. Xu, Lei & Su, Jun, 2016. "From government to market and from producer to consumer: Transition of policy mix towards clean mobility in China," Energy Policy, Elsevier, vol. 96(C), pages 328-340.
    19. Taalbi, Josef, 2017. "What drives innovation? Evidence from economic history," Research Policy, Elsevier, vol. 46(8), pages 1437-1453.
    20. Giovanni Dosi & Richard Nelson, 2013. "The Evolution of Technologies: An Assessment of the State-of-the-Art," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(1), pages 3-46, June.

    More about this item

    Keywords

    Demonstrations; technology push; demand pull;
    All these keywords.

    JEL classification:

    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:diw:diwwpp:dp1601. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bibliothek (email available below). General contact details of provider: https://edirc.repec.org/data/diwbede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.