An essay on innovations for sustainable development

Abstract

Ongoing environmental innovation is the only way to reduce pressures on environmental qualities while maintaining income growth. However, the views on how to initiate and foster environmental innovations differ. In the essay we discuss three theoretical approaches. From neo-classical economic theory we distill the message that research and development of new technology thrive on economic incentives. The evolutionary theory describes patterns in technological development but in our view it exaggerates the importance of technological interlinkages that cause lock-in, as barriers to environmental innovation and it overlooks the organisational impediments within the firm. From the behavioural theory of the firm we learn that innovations can only get through in situations of urgency. The conclusion is that a strict environmental policy can create the sense of urgency and strong incentives for environmental innovation. Ambitious and inflexible targets at macro-level but flexibility at micro-level of the firm are unsurpassable as a policy to foster environmental innovation.

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