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Schumpeterian economic dynamics of greening: propagation of green eco-platforms

Journal of Evolutionary Economics volume 30, pages 929–948 (2020)Cite this article

Abstract

The greening of business is now widely recognized as firms take the lead from reluctant governments in making sustainable operations profitable. The greening of business may be contrasted with the “business of greening” – in the sense that greening may be associated with the emergence of smart green platforms that propagate and expand as they creatively destroy industries that are rooted in a fossil fuelled past. Such considerations bring into focus the evolutionary economic dynamics of greening, involving business concepts like emergence of platforms and networks, the capture of increasing returns, the role of manufacturing, mass production and learning curves, which help to account for green innovation and green growth as drivers of the global green shift. This is a perspective that is distinguished from “zero growth” and “natural capitalism” approaches to greening; and it is one that is as applicable as much to China and emerging industrial powers as to advanced industrial countries. Fundamentally, greening is characterized as the emergence of green business platforms which create new possibilities for green growth as they propagate, driven by supply-side dynamics as much as by demand-side dynamics involving changed consumer behavior, as in the rise of the sharing economy. Fundamentally it is cost reduction (via learning curves) and capture of increasing returns that open up opportunities for new business strategies that creatively destroy the old business models associated with fossil fuels and resource wastage.

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Notes

  1. The notion of “zero growth” derives from a consideration of what is possible for an economy that is growing within the limits of a finite world e.g. Daly and Cobb 1989). Because it ignores the possibilities of enhanced resource and energy productivity associated with green growth, it has little to offer emerging industrial powers like China, and indeed its strict pursuit today would condemn China et al. to perpetual poverty. The idea of “natural capital” as underpinning the operations of capitalism, is advanced by authors such as Hawken (1993), who characterize natural capital as intrinsically measurable and capable of carrying a price that reflects its scarcity. No such hypotheses are called for in the green platforms approach.

  2. The most widely cited study in the sociotechnical transition (STT) tradition is that of the transition from sailing ships to steam-powered vessels in the nineteenth century, as developed by Geels (2002).

  3. For an argument along these lines, see for example Mathews and Tan (2014).

  4. See Michael Spence, “Asia’s new growth model,” Project Syndicate (1 June 2011), available at: http://www.project-syndicate.org/commentary/spence23/English, for an argument that the Asian powers are moving towards a new development model; while a much more explicit argument is provided by Hu Angang (2006).

  5. The green steel entrepreneur, Sanjeev Gupta, has proposed a link with EV production, utilizing the abandoned production facilities for the Holden car company in Adelaide – just as Elon Musk was able to utilize abandoned Toyota production facilities for his Tesla EV manufacturing activities in California. On this, see “Gupta plans EV plant in Australia, powered by solar and storage”, by Giles Parkinson, RenewEconomy, Jan 222,018, at: http://reneweconomy.com.au/gupta-plans-ev-plant-australia-powered-solar-storage-94177/

  6. The German steel company Thyssenkrupp announced its innovation to produce slab steel utilizing hydrogen in place of coal, in November 2019. See the announcement posted to Clean Energy Wire, “Thyssenkrupp tests use of hydrogen in steel production to bring down emissions”, 12 Nov 2019, at: https://www.cleanenergywire.org/news/thyssenkrupp-tests-use-hydrogen-steel-production-bring-down-emissions

  7. See Yang et al. (2017), for a study of the potential for municipal fly ash to be utilized as an input in electric arc furnace steel making, where it is found that municipal incinerators could achieve zero waste by making this linkage.

  8. See Johnson et al. (2008) for a study of the energy gains in using recycled steel as input to electric arc steel furnaces in place of virgin iron ore. The results are that the operation utilizing 100% scrap steel recycling uses an energy level of 26 GJ – much lower than current operations around the world, and lower than the 79 GJ needed for 100% virgin iron ore (indeed, an energy saving of 70%).

  9. See the media release, “Neoen Australia, Nectar Farms and the Victorian government sign global-first partnership in power and food supply,” 27 June 2017, at: https://www.neoen.com/wp-content/uploads/2017/06/Media-Release_Bulgana-MoU_June2017_UK.pdf

  10. On Sundrop Farms and its wider significance, see for example Dulaney (2017). A US example of this platform initiative is the case of Plenty, with financial backing of $200 million from the $100 billion Softbank Vision Fund, created by Japanese businessman Masayoshi Son. See the Bloomberg report at: https://www.bloomberg.com/news/articles/2017-07-19/softbank-s-vision-fund-leads-200-million-bet-on-indoor-farming

  11. See Kenney and Zysman (2016) as well as Zysman and Kenney (2017) for elaboration, while De Reuver et al. (2018) update the discussion with more recent findings.

  12. For a discussion of the history and current applications of the notion of the circular economy, contrasted with the resource-wasting linear economy, see Winans et al. (2017).

  13. For discussion of strategizing by firms around platforms and networks, see Gawer (2014), or McIntyre and Srinivasan (2017).

  14. For a recent exposition of the “platform leadership” concept, see Gawer and Cusumano (2014).

  15. On open innovation, see Chesbrough and Appleyard (2007).

  16. See Zysman and Kenney (2017).

  17. Discussions of these cases can be found in Mathews (2013, 2016, 2018).

  18. Cases in China are discussed in Mathews and Tan (2014, 2016); Mathews et al. (2018); and Zeng et al. (2018).

  19. On the power of increasing returns and how they underpin the success of mass production in the twentieth century, see Young (1928).

  20. See Schumpeter (1912/1934) for his original exposition of the sources of dynamism of the capitalist system, and Schumpeter (1928) for an exposition targeted at the economic literature, and Schumpeter, 1942 for his outline of the process of creative destruction.

  21. See “Celebrating 10 years of innovation with Snapdragon”, Nov 152,017, at: https://www.qualcomm.com/news/onq/2017/11/14/celebrating-10-years-innovation-snapdragon

  22. On the original conception of circular and cumulative causation (C&CC) see Kaldor (1970).

  23. For elaboration on this point, see Mathews and Reinert (2014).

  24. For a discussion of the innovations in production achieved by Ford, and their impact on costs and market growth, see for example Abernathy and Utterback (1978).

  25. Alibaba was largely responsible for creating efficient value chains in China and now operates the largest B2B platform in the world.

  26. See Geels (2011) for a comprehensive discussion of the strengths of the MLP in characterizing sustainability transitions. And yet while mentioning evolutionary economics, this exposition offers no fundamental economic driver of the shift, and neglects to mention costs and learning curves, increasing returns, platforms and network effects, and other aspects of creative destruction.

  27. On the greening of China, see for example Piovani (2017). On China’s greening of its energy systems, see the series of studies by Mathews and Tan (2014, 2016); and on the creation of circular economy resource flows, see Mathews et al. (2018).

  28. Altenburg and Assmann (2017) bring together a range of studies that address the applicability of green industrial strategies as industrialization diffuses around the world.

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  1. Faculty of Business and Economics, Macquarie University, Sydney, NSW, 2109, Australia

    John A. Mathews

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Mathews, J.A. Schumpeterian economic dynamics of greening: propagation of green eco-platforms. J Evol Econ 30, 929–948 (2020). https://doi.org/10.1007/s00191-020-00669-5

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Keywords

  • Smart green platforms
  • Green growth
  • Green economy
  • Renewable energy
  • Circular economy
  • China

JEL classifications

  • O14
  • O25
  • O33
  • P18
  • Q50