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Directing Technical Change from Fossil-Fuel to Renewable Energy Innovation: An Empirical Application Using Firm-Level Patent Data

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  • Joëlle Noailly

    (CIES, Graduate Institute of International and Development Studies, Switzerland)

  • Roger Smeets

    (Rutgers Business School, USA)

Abstract

This paper investigates the determinants of directed technical change at the firm level in the electricity generation sector. We use firm-level data on patents filed in renewable (REN) and fossil fuel (FF) technologies by 5,261 European firms over the period 1978-2006. We investigate how energy prices, market size and knowledge stocks affect firms' incentives to innovate in one technology relative to another and how these factors may thereby induce a shift from FF to REN technology in the electricity generation sector. We separately study small specialized firms, which innovate in only one type of technology during our sample period, and large mixed firms, which innovate in both technologies. We also separate the extensive margin innovation decision (i.e. whether to conduct innovation) from the intensive margin decision (i.e. how much to innovate). Overall, we find that all three factors – energy prices, market sizes and past knowledge stocks - matter to redirect innovation towards REN and away from FF technologies. Yet, we find that these factors have a larger impact on closing the technology gap through the entry (and exit) of small specialized firms, rather than through large mixed firms' innovation. An implication of our results is that firm dynamics are of direct policy interest to induce the replacement of FF by REN technologies in the electricity generation sector.

Suggested Citation

  • Joëlle Noailly & Roger Smeets, 2013. "Directing Technical Change from Fossil-Fuel to Renewable Energy Innovation: An Empirical Application Using Firm-Level Patent Data," Working Papers 2013.34, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2013.34
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    References listed on IDEAS

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    Cited by:

    1. Jan Witajewski-Baltvilks & Elena Verdolini & Massimo Tavoni, 2015. "Directed Technological Change and Energy Efficiency Improvements," Working Papers 2015.78, Fondazione Eni Enrico Mattei.
    2. Witajewski-Baltvilks, Jan & Verdolini, Elena & Tavoni, Massimo, 2017. "Induced technological change and energy efficiency improvements," Energy Economics, Elsevier, vol. 68(S1), pages 17-32.
    3. Geraldine Ang & Dirk Röttgers & Pralhad Burli, 2017. "The empirics of enabling investment and innovation in renewable energy," OECD Environment Working Papers 123, OECD Publishing.
    4. Subtil Lacerda, Juliana & van den Bergh, Jeroen C.J.M., 2020. "Effectiveness of an ‘open innovation’ approach in renewable energy: Empirical evidence from a survey on solar and wind power," Renewable and Sustainable Energy Reviews, Elsevier, vol. 118(C).
    5. Marit E. Klemetsen & Brita Bye & Arvid Raknerud, 2013. "Can non-market regulations spur innovations in environmental technologies? A study on firm level patenting," Discussion Papers 754, Statistics Norway, Research Department.
    6. Joelle Noailly & Victoria Shestalova, 2013. "Knowledge Spillovers from Renewable energy Technologies, Lessons from patent citations," CIES Research Paper series 22-2013, Centre for International Environmental Studies, The Graduate Institute.
    7. Joëlle Noailly & Victoria Shestalova, 2013. "Knowledge spillovers from renewable energy technologies, Lessons from patent citations," CPB Discussion Paper 262, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Rob Aalbers & Victoria Shestalova & Viktoria Kocsis, 2012. "Innovation policy for directing technical change in the power sector," CPB Discussion Paper 223, CPB Netherlands Bureau for Economic Policy Analysis.
    9. Piao, Zhefan & Miao, Binbin & Zheng, Zihan & Xu, Feng, 2022. "Technological innovation efficiency and its impact factors: An investigation of China's listed energy companies," Energy Economics, Elsevier, vol. 112(C).
    10. Yang, Bo & Liu, Baozhen & Peng, Jiachao & Liu, Xujun, 2022. "The impact of the embedded global value chain position on energy-biased technology progress: Evidence from chinas manufacturing," Technology in Society, Elsevier, vol. 71(C).
    11. Huang, Xiaoqi & Liu, Wei & Zhang, Zhan & Zhao, Zhihui, 2022. "Intensive judicial oversight and corporate green innovations: Evidence from a quasi-natural experiment in China," China Economic Review, Elsevier, vol. 74(C).
    12. Martijn van den Berge & Anet Weterings, 2014. "Relatedness in eco-technological development in European regions," Papers in Evolutionary Economic Geography (PEEG) 1413, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jun 2014.

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    More about this item

    Keywords

    Directed Technical Change; Renewable Energy; Fossil Fuel Energy; Patents; Innovation; Firm Dynamics;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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