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2
Dynamics of new industry formation
The formation of new renewable energy industries is paramount to facing economic, environmental
and societal challenges. A key insight from the field of innovation studies is that the innovation
processes that underlie the formation of new industries are systemic in nature. That is, innovation
occurs in the context of an “innovation system” or “innovation eco-system”. The basic premise behind
this notion is that innovation – the introduction of new products, processes or services – is reliant on
flows of knowledge and technology between people, businesses and other actors. This interaction can
be direct or indirect, and affects the circumstances under which an idea can be developed into a
product, process or service in the market place (Hekkert et al. 2007). A key dimension of this is that a
range of actors needs to become involved in the generation, diffusion and use of new technologies.
This broad set of actors, ranging from technology producers, researchers, policy-makers to end-users,
together can be seen to be engaged in the process of industry formation. This interaction is guided by
institutional frameworks, which refer to “hard” (formal) institutions such as policies and regulations
and more “soft” (informal) dimensions which can be understood as the rules of the game (Hillman et
al. 2008).
2.1
Key processes in industry formation
Recent developments in innovation systems studies stress that the overall process of development of
a new industry normally is associated with a number of key sub-processes. These processes and their
characteristics have been derived from a review and systematisation of the literature addressing the
emergence of novel technologies, actors and industries (Johnson & Jacobsson 2001). We discuss a
selection of these briefly in the following.
Development and exchange of knowledge
Innovation studies as a field underlines the importance of knowledge generation, learning and new
combinations of existing knowledge, in development of novel technologies and industries. While
traditional economic approaches focus heavily on knowledge generation via research & development
(R&D), the innovation literature stresses that processes of knowledge development have multiple
sources such as learning from use, trial and error, experience and imitation. Several studies underline
the fact that R&D alone seldom drive innovation (Cohen et al. 2002; Kline & Rosenberg 1986). Mowery
et al. (2010) point out how demand side factors, for instance programmes of public procurement and
market creation, were highly important in some of the large-scale innovation programs coupled to IT,
semiconductors and agriculture. Knowledge development linked to and enabled by the demand side
thus constitutes an important dynamic for knowledge development (Mowery & Rosenberg 1998).