Second-order sustainability—conditions for the development of sustainable innovations in a dynamic environment

Abstract

In particular radical innovations can be important means to achieving improved sustainability. Due to the existence of path dependency and lock-in, however, the transition from one technological trajectory to another, more sustainable one is often impeded by significant barriers. Fortunately, these barriers are by their nature subject to substantial changes in time; so, it makes sense to carefully distinguish between periods of stability (showing high barriers) in which the given trajectory can hardly be left and periods of instability (characterized by low barriers) where a new trajectory can be reached more easily. The latter distinction matters since sustainable innovations often rely on governmental regulation and the economic burden arising from this regulation will be much lower in periods of instability. Moreover, due to the complexity and dynamics of change in their respective environments, innovations are generally associated with fundamental uncertainty such that it becomes impossible to predict the degree of sustainability yielded by specific innovations in the longer run. Under these circumstances, it is essential to facilitate the change between trajectories and to allow for the possibility to select between a variety of alternative trajectories within a process of trial and error. Sustainability as viewed from this evolutionary perspective is therefore better understood as the general capability to adapt, that is, to readily change from less to more sustainable technological trajectories. Since the latter kind of sustainability determines the conditions under which the former kind (i.e. sustainability related to a specific technology) can be achieved, the two kinds are respectively called second-order and first-order sustainability.

Finally, a series of determinants (and corresponding indicators) from the techno-economic, political, and socio-cultural sphere is identified which, after proper measurement and weighting, allow for making an assessment whether and when the incumbent industry is sufficiently destabilized and the political system rendered sufficiently favorable to the new, more sustainable technology such that a transition to the preferred trajectory is possible without too much effort.

Introduction

Innovations play a crucial role not only as the basis of the persistent economic growth prevailing especially in developed countries since the beginning of the industrial revolution (see Schumpeter, 1934, Nelson and Winter, 1982, for evolutionary; Romer, 1986, for neoclassical perspectives on innovation-driven growth); they are also an important, if not the only, means for maintaining the sustainability of this development, that is, for avoiding destruction of the natural environment and exhaustion of natural resources that may be needed by all our descendents in order to maintain at least the current level of wealth (see Rennings, 2000 for an overview). However, innovations towards sustainability are often associated with substantial costs. From the point of view of environmental economics this is due to the fact that environmental innovations internalize external costs for which the innovator does not receive a compensating benefit. By contrast, Porter and Van der Linde (1995) claim that these costs can be substantially reduced, if, rather than merely redressing the consequences of existing technologies (e.g. by end-of-pipe solutions), innovation is understood as an integrated process avoiding environmental externalities right from the beginning. The remaining costs can even be turned into a benefit, if, due to its more fundamental character, an innovation avoids both external and internal costs.

Despite the basic attractiveness of this kind of innovation, employing them is far from rendering the path towards sustainability self-sustaining for two reasons. On the one hand, all environmentally more benign substitutes after a while tend to give rise to unforeseen environmentally hazardous side effects such that, in the longer run, new technological (including organizational) substitutes have to be generated again and again. Moreover, the development and becoming effective of new substitutes takes time, allowing related technology branches to exhibit environmental externalities in their turn. Due to the higher uncertainty associated with fundamental innovations, they will show this tendency even more markedly than incremental innovations succeeding within one paradigm. As a consequence, sustainability will generally remain temporary and more or less incomplete.

On the other hand, fundamental technological change requires the transition from one technology paradigm to another and, therefore, is not only less likely to occur and but also associated with higher uncertainty and risk than innovation along a given trajectory (Dosi, 1982, Dosi, 1988). Accordingly, the frequency of environmentally sound and economically profitable fundamental innovations will remain low unless they are supported by policy instruments specifically referring to the causes of paradigm formation and the related lock-ins. Klemmer et al. (1999) to some extent point in this direction when they acknowledge that a mix of regulative measures is needed to properly account for the complexity of circumstances in which innovation arise.

In this paper, both time and uncertainty will be accounted for more thoroughly as crucial conditions of technological development in general and especially with regard to sustainability. In particular, it is assumed that, along with the change in circumstances, periods of stability of a given technological trajectory (where establishing a new paradigm requires much effort) alternate with periods of instability (where such a shift is more easily achieved). It is further assumed that it is possible to identify and even strategically use the latter phases of instability in the search for the lowest possible cost of achieving a higher degree of sustainability. In order to justify this claim, Section 2 starts with a discussion of the relevance of innovation in the context of sustainability from both the neoclassical and ecological economics' perspective. In Section 3, an evolutionary framework is used to show how potential progress towards greater sustainability by means of innovations may be hampered by complexity, uncertainty, path dependency and lock-in. While identifying the strategic elements for overcoming these shortcomings, Section 4 specifies the conditions for the more ready identification and implementation of sustainable innovations—a property we call second-order sustainability because it refers to the dynamic interrelation between innovations rather than the innovations themselves. In order to make use of this dynamic concept of sustainability, Section 5 identifies a variety of its potential determinants and indicates how they may be applied. Finally, conclusions are drawn in Section 6.