Towards a Theory and Policy of Eco-Innovation - Neoclassical and (Co-)Evolutionary Perspectives

Abstract

Innovation processes toward sustainable development (eco-innovations) have received increasing\nattention during the past years. Since existing theoretical and methodological frameworks do not\naddress these problems adequately, research need can be identified to improve our understanding of\ninnovation processes toward sustainability in their different dimensions, complex feedback\nmechanisms and interrelations. This paper discusses the potential contribution of neoclassical and\n(co-)evolutionary approaches from environmental and innovation economics to fill this gap. It is\nargued that both approaches have their merits and limits concerning a theory and policy of ecoinnovation.\nNeoclassical methods are most elaborated to analyze the efficiency of incentive systems\nwhich seems to be essential for stimulating innovation. Evolutionary approaches are more\nappropriate for analyzing long-term technological regime shifts. On this theoretical basis, a crucial\nquestion is if innovations toward sustainability can be treated like normal innovations or if a\nspecific theory and policy are needed. Three specialties of eco-innovation are identified: the double\nexternality problem, the regulatory push/pull effect and the increasing importance of social and\ninstitutional innovation. While the first two of them are widely ignored in innovation economics,\nthe third is at least not elaborated appropriately. The consideration of these specialties may help to\novercome market failure by establishing a specific eco-innovation policy and to avoid a "technology\nbias" by a broader understanding of innovation. Eco-innovation policy requires close coordination\nwith environmental policy in all innovation phases. Environmental and eco-innovation policy can be\nregarded as complementarily. However, an environmental policy neglecting the potentially\nbeneficial effects of a specific eco-innovation policy (especially in the invention phase) may lead to\nexcessive economic costs. Due to the specialties of eco-innovation, it seems moreover to be crucial\nto strengthen the importance of social and institutional innovation in both eco-innovation theory and\npolicy.

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