Antecedents and Effects of Company Behavior in Energy Technology Innovation and Implementation

1. Antecedents of Company Behavior in Energy Technology Development: Insights from the Solar Industry Meagan S. Mauter, Ph.D.Assistant Professor, Chemical Engineering and Engineering & Public PolicyCarnegie Mellon Universitymauter@cmu.edu

2. Enabling water and energy efficient technologies by identifying and addressing the technical and structural barriers to their implementation

3. Antecedents and Effects of Company Behavior in Energy Technology Innovationand Implementation • The trajectories and dynamics of energy innovation are intrinsically linked to the companies invested in energy technology development. • Innovation • How do firms respond to energy technology innovation policy instruments? In particular, do instruments influence the type of innovation alliance formation? • How do technology characteristics affect a firm’s propensity to form exploration and exploitation alliances? • Implementation • How much variation exists in the extraction of energy resources? • Does firm level variation dominate technology level or resource level variation? • Environmental Impact • How do lessons from “Innovation” and “Implementation” change the outlook for the costs of water/energy impact abatement?

4. Impact of Technology Characteristicson the Formation of Exploration and Exploitation Alliances –Insights from the Solar Photovoltaic Industry

5. ETI Policy Instruments Anadonand Holdren, 2008

6. Theoretical Framework Technology Push Policies Corporate Investments in Technology Innovation Contextual Factors Deployment (Market Pull) Policies Investments in Exploration (e.g. R&D) Policy Induced Technology Push Policy Induced Market Growth Investments in Exploitation (e.g. production) Firm and Technology Characteristics

7. Innovation Partnerships • Amid trends towards increasing speed of innovation and rising complexity of products, firms no longer rely exclusively on in-house capabilities for innovation • Increasingly rely on external partners who provide complementary resources and serve as a source of learning in fields where a company might possess little expertise (e.g., Mowery et al., 1998; Rosenkopf and Almeida, 2003) http://americanenergyinnovation.org/

8. Exploration vs Exploitation • Exploration • “search, variation, risk-taking, experimentation, play, flexibility, discovery, and innovation” (March, 1991) • search for new technologies • e.g., R&D alliances • Exploitation • “refinement, choice, production, efficiency ,selection, implementation and execution” (March, 1991) • enhance the firm’s capacity to commercialize existing technologies • e.g., production and marketing alliances, • Exploitation alliances enhance learning by doing, potentially lowering costs faster than learning by searching (R&D) • A strong focus on technological exploitation relative to exploration will yield less radical innovations, reduce technological diversity, and may increase technological lock-in (Malerba, 2009; Sandén, 2005).

9. Exploration vs Exploitation • Previous literature attributes a firm’s balance between exploration and exploitation using • industry-level antecedents such as competitive intensity (e.g. Jansenetal., 2006; Levinthal and March, 1993) • firm-internal factors such as firms’ slack resources (e.g. Greve, 2007; Nohriaand Gulati, 1996) or their technology portfolio (Quintana-Garcíaand Benavides-Velasco, 2008) • Alliance type may be influenced by the complexity, maturity, or the tacitness of the knowledge they draw upon (Grant, 1996) • Theory, but no empirical analysis to date • Empirically test how technology characteristics affect a firm’s propensity to form exploration vsexploitation alliances?

10. Hypotheses • H1: The larger the technological complexity of a firm’s product, the more likely the firm is to form an exploration rather than an exploitation alliance. • H2: The larger the technological maturity of a firm’s product, the less likely the firm is to form an exploration rather than an exploitation alliance. • H3: The larger the tacitness of technological knowledge of a firm’s product, the more likely the firm is to form an exploration rather than an exploitation alliance. • --------- • H_b: The larger the _____ of a firm’s product, the more likely the firm is to form an exploitation alliance which involves a stronger exploratory component. Increased complexity, reduced maturity, and greater tacitness leads to investment in R&D partnerships

11. Hypotheses Relevance to PV • The solar PV industry is a suitable research setting for analyzing the effect of technological characteristics on exploration and exploitation alliances as • 1) A large part of the industry’s evolution occurred over the past 15 years. There was a 200 fold increase in installed capacity between 1998-2012.

13. Hypotheses Relevance to PV • The solar PV industry is a suitable research setting for analyzing the effect of technological characteristics on exploration and exploitation alliances as • 1) A large part of the industry’s evolution occurred over the past 15 years. There was a 200 fold increase in installed capacity between 1998-2012. • 2) There are several PV technologies with different characteristics which may turn out to become the ‘winning technologies’, each at different stages of technological maturity

14. Overview of PV Technologies

15. Hypotheses Relevance to PV • The solar PV is a suitable research setting for analyzing the effect of technological characteristics on exploration and exploitation alliances as • 1) A large part of the industry’s evolution occurred over the past 15 years. There was a 200 fold increase in installed capacity between 1998-2012. • 2) There are several PV technologies with different characteristics which may turn out to become the ‘winning technologies’, each at different stages of technological maturity • 3) Technology development has played a key role for firm strategies in the solar PV sector • 4) In the face of a highly dynamic environment, firms have made extensive use of alliances

16. Research Methodology • Information on inter-firm alliance agreements was obtained from the Factiva database. • 1079 alliances for which we extracted the announcement year, the partner’s identities, and the type of agreement. • exploration alliances as those alliances that include knowledge generating R&D agreements • exploitation alliances involve joint marketing and services, original equipment manufacturer/value added reseller (OEM/VAR), licensing, production or supply. • Technological complexity -> product position in the value chain (ingots and wafers vs final PV system) • Technological maturity -> wafer-based crystalline silicon, thin-film PV and emerging PV. • Tacit knowledge -> geographic proximity between the alliance partners

17. likelihood of exploration vs. exploitation alliance

18. Summary of Hypotheses Tests

19. Implications • propensity to form exploration vsexploitation alliances depends on the characteristics of the technology, namely maturity and tacitness • exploration alliances are particularly common in the early stages of a technology in the life-cycle when there is a considerable amount of technological uncertainty • success of exploration alliances may more strongly depend on developing close ties to a number of trusted partners, rather than a mere reliance on formal, well-developed contractual relationships • measures used by policy makers to support a specific industry may need to evolve in response to changes in the technology life-cycle