Innovations for reaching the green sustainable development goals –where will they come from?

2.1 The need for innovations in the north and south

The role of innovations in preventing global ecological disaster has been embedded in North-South economic development from early on. According to the Environmental Kuznets Curve (EKC)-hypothesis, environmental pressure grows faster than income in a first stage of economic development. This is followed by a second stage in which environmental pressure still increases but more slowly than GDP. After a particular income level has been reached, environmental pressure declines despite continued income growth. However, the literature has pointed our several critical aspects of this concept. First, the existence of an EKC is far from certain. It may hold better for local environmental effects than global ones (Ekins 1997; Dinda 2004; Galeotti et al. 2006). Furthermore, even if such a development can be seen in the developed world, it might just reflect a displacement effect of dirty industries to other less developed countries. Finally, there is clear evidence that such a development does not occur naturally, but requires active policies and regulations and an appropriate institutional setting (Dutt 2009). Within the global environmental debate, it is argued that NICs do not necessarily have to follow the pollution path of the industrialized countries. Assuming the existence of an environmental EKC, an alternative development path has been labelled “tunnelling through the EKC” (Munasinghe 1999; Gallagher 2006). This concept argues that countries catching up economically can realize the peak of their EKC at a much lower level of environmental pressure than the developed countries, because they can draw on the experience of industrialized countries allowing them to use the latest sustainability technologies. This leads to a “strategic tunnel” through the EKC. Here, environmental economists put faith into quick technological development in the North and knowledge transfer as a key for reconciling environmental sustainability with economic development in the South. Implicitly, it is taken for granted that cutting edge technologies developed in the North will be used in the South. Thus, key issues seen within this concept are the question of how to finance the transfer of the latest technologies from the countries of the North to NICs, including policy concepts such as climate funds.

Walz and Marscheider-Weidemann (2011) summarized the results of the research on technological development in the South and the factors which influence the build-up of their technological competences. Since the end of the 1980s, the concepts of Social or Absorptive Capacity (Abramovitz 1986; Cohen and Levinthal 1990) and technological capabilities (Lall 1998; Bell and Pavitt 1993) are widely known. The results of the research on technological development in NICs and the factors which influence the build-up of their technological capabilities (e.g. Fagerberg and Godinho 2005; Nelson 2007; Malerba and Mani 2009; Lall 1998; Lee 2005; Rasiah 2008) have underlined the importance of absorptive capacity and competence building. Studies analyzing these developments have to take into account the changing conditions for learning and knowledge acquisition. One aspect to consider is the tendency that the build-up of technological and production capabilities is increasingly separated (Bell and Pavitt 1993). Another aspect relates to the effect of globalization on the mechanisms for knowledge dissemination. Archibugi and Pietrobelli (2003) stress the point that importing technology has per se little impact on learning and call for policies to upgrade cooperation strategies towards technological partnering. Nelson (2007) highlights the changing legal environment and the fact that the scientific and technical communities have moved much closer together. All these factors lead to the conclusion that domestic competences in sustainability related science and technology fields are increasingly a prerequisite for the successful absorption of green technologies in NICs.

There are some arguments which point towards the conclusion that sustainability innovations emerge primarily in the North: In general, the framework conditions for innovations are seen as superior in the North. In addition, environmental quality is characterized as a superior economic good with high income elasticity of demand. Thus, lead users for sustainability innovations would be typically found in high income countries (Quitzow et al. 2014) Furthermore, the externalities, especially of global environmental aspects, make environmental policy a prerequisite, which is also more likely to be found in high income countries. In contrast, with scarce public funds and pressing domestic short term needs, it is questionable whether environmental problems make it to the top lists of challenges to be tackled early on in the South. Iizuka (2015) points out that in developing countries the rival issue of catching up has often higher priority than environmental sustainability. On the other hand, there are also arguments for countries of the South promoting green innovations early on (Walz and Köhler 2014; Köhler et al. 2014): Environmental problems are increasingly seen as a stumbling block in the economic development of the South, especially with regard to the health effects associated with them. The markets for green technologies might also offer opportunities; thus the interaction of economic and environmental interests might lead to a – perhaps uneven – transition path (Iizuka 2015). Existing path dependencies are a strong obstacle especially to green innovations related to infrastructure (Walz 2007), and such path dependencies are much more likely to be more pronounced in the North. Finally, innovations require adaptations and take place in a co-evolution between technology and socio-economic environment. It is argued that especially countries from the South have advantages in developing innovations which are suited for the South. Thus, from a conceptual basis, there are mixed arguments for whether or not innovations for the green SDGs will primarily evolve in the North, or whether countries of the South will be catching up or even leapfrog to the top.

Research on the role of geographical diversification for the management of companies’ export strategies has addressed this issue from an additional perspective. On the one hand, commentators argue that factors in the destination country, e.g. its physical infrastructure, are important for the exporting firm (Hoskisson et al. 2013). Thus, the functions an export good has to fulfill must fit the conditions of the country of destination. Green technology markets increasingly grow in developing countries. This requires that the technologies are adapted to the specific needs, which are characterized by lower framework conditions. This can imply that a more downsized good is needed, which is only able to deliver the most basic functions in a low factor environment. Lately this strategy has been also discussed under the label of frugal innovations (Agarwal and Brem 2012; Tiwari and Herstatt 2012). Designing such a good requires, however, not the typical cutting edge technological capabilities, but the ability to understand the low factor environment and to adapt the product to it. On the other hand, from an institutional framework perspective the capability to serve a foreign market is also influenced from conditions of the supplying company in both its home and destination country (Peng 2012; Hoskisson et al. 2013; Boehe et al. 2016). The home countries’ institutional and factor conditions shape the resources and capabilities of the company. Thus, if the country of destination is characterized by weak factors and institutions, a company might enjoy an adversity advantage, because some weak conditions in its home country have enabled it to develop capabilities of succeeding under such conditions (Cuervo-Cazurra and Genc 2008; Boehe et al. 2016). Such a situation can support a segmentation of markets, with cutting edge technology provided by companies from countries with superior cutting-edge technological capabilities for a primary market, and companies adapted to a weaker factor and institutional framework supplying a secondary market. Thus, from a conceptual point of view, it is not only the technological capabilities but also the general capabilities which influence success on international markets.

2.2 Methodology

Green innovations require good framework conditions for innovations in general. Unless some level of sophistication is reached with regard to technological readiness and innovation capabilities, specific policy strategies will not be successful. The analysis of general capabilities for sophisticated technologies and innovations draws on data from the World Economic Forum (WEF 2015), which has constructed various indices on economic and innovation factors. Rennings (2000) has argued that the double externality problems results in environmental innovations depending heavily on environmental policy. Thus, we include indicators about governance. The general capabilities necessary for good governance are often characterized based on indices of corruption and good governance. We draw on the corruption perception index of Transparency International, which ranks countries based on how corrupt their public sector is perceived to be, and data from the World Bank, which collects a dataset summarizing the views on the quality of governance.

The measurement of technological capabilities can draw on the experience with innovation indicators made over the last two decades (see Grupp 1999; Smith 2005; Freeman and Soete 2009). Patents are among the most used indicators in this kind of research. They belong to the intermediate output indicators of knowledge build-up and are directly related to technological capabilities. The choice of patent offices from which applications are taken is especially tricky for country comparisons, since patents also serve to protect markets, and it is therefore widely known that there are significant country biases in favor of domestic applicants which give highest priority to protect home markets. In order to account for country bias, the triadic patent approach has been developed in the 1990s, which takes only patents into account which are applied for at the EPO, USPTO and JPO at the same time. Frietsch and Schmoch (2010) point to different methodological problems with this approach, especially with regard to difficulties in accounting for the effects of new players emerging on the international stage. Thus, Frietsch and Schmoch (2010) developed a transnational patent approach, which is also used for this paper. This approach counts all PCT applications whether transferred to EPO or not, and all direct EPO applications without precursor PCT application. Thus, all patent families with at least a PCT application or an EPO application are taken into account. After testing and comparing different approaches, Frietsch and Schmoch (2010) conclude that this transnational approach provides larger samples than the Triadic approach for the analysis of specific fields, and is capable of grasping the relationships between different countries more reliably. In this way, a method of mapping international patents is employed which does not target individual markets but is much more transnational in character. The patents identified in this way reveal those segments in which patent applicants are already taking a broader international perspective. The available data were retrieved from the PATSTAT database. The latest year available for the analysis was 2013. Earlier periods for patents were used to describe the increase in patenting over the years. In order to retrieve additional information on cooperation patterns, we also performed an analysis of co-patenting.

Publication data (number of peer-reviewed journal publications) is also a highly common indicator used for measuring and comparing research activities in the different technological fields (Grupp 1999; Smith 2005). Data are taken from Web of Science (WoS). The latest year, for which reliable data was available, was 2014.

In order to measure countries’ performance with regard to bringing innovation technologies to the market, we look at export data. International trade figures indicate the degree to which a country is able to compete internationally for specific technologies. The database UN-COMTRADE serves as the source for trade figures. The classification of the technologies is based on the Harmonized System (HS) 2002. This foreign trade classification allows a higher disaggregation and therefore a better targeting of the sustainability technologies compared with the older classifications common in international comparisons (Standard International Trade Classification SITC). The latest year available for the analysis was 2013. The trade data can be used to look at the performance of a country on the world market. On a more disaggregated level, it can be used to look into more detail at how a country performs in trade with all other countries. Both levels of analysis are covered within this paper. Especially the addressing of the research question requires country-to-country trade data.

For patents, publications and world trade, the selected countries’ share of the world total was calculated (patent share, publications share, world trade share). In order to account for the different sizes of countries, we calculated export shares of GDP and patent and publications intensities per million inhabitants. Furthermore, specialization indicators such as relative patent advantage (RPA), relative literature advantage (RLA), and relative export activity (RXA) were calculated, in order to analyze whether or not the countries specialize in sustainability technologies.

For every country i and every technology field j the Relative Patent Activity (RPA) is calculated according to: RPA _ij = \( {100}^{\ast } \tanh\ \ln\ \left[\left({p}_{i j}/{\sum}_i\ {p}_{i j}\right)/\left({\sum}_j\ {p}_{i j}/{\sum}_{i j}\ {p}_{i j}\right)\right] \) i. e. the RPA relates the number of patents p for a given technology j in a country i to the worldwide patents for this technology. This ratio is then compared with the same ratio for all technologies.

The RLA and the RXA are calculated in a similar way as the RPA, by substituting patents (p) by publications (l) and exports (x), respectively. All specialization indicators are normalized between +100 and −100 (see Grupp 1999). Positive values indicate an above average specialization in the analyzed technology; negative values show that the country is specializing more in other technologies.

In order to analyze market segmentation strategies, we looked at patent collaboration and at country-to-country trade data capturing regional market segments. The co-patenting patterns reveal which countries are especially forging links with regard to knowledge sharing. Country-to-country trade data allows for the identification of those markets which are especially targeted by a country. Thus, the export shares were calculated for single countries or country groups. In order to indicate the specialization of a country in different regional segments, a regional export share index was calculated, which is also normalized between −100 and +100.

For every country i and every market segment j the Relative Trade Specialisation (RTS) is calculated according to: RTS _ij = \( {100}^{\ast } \tanh\ \ln\ \left[\left({x}_{i j}/{\sum}_i\ {x}_{i j}\right)/\left({\sum}_j\kern0.15em {x}_{i j}/{\sum}_{i j}\kern0.1em {x}_{i j}\right)\right] \) i.e. the RTS relates the country’s share of exports to a specific region to the country’s export share of world exports.

Green technologies are neither a patent class nor a classification in the HS-2002 classification of the trade data from the UN-COMTRADE database or a WoS classification which can be easily extracted. With regard to patents, many technologies which fall under the heading of the technology classes mentioned above form specific international patent subclasses (IPC); they are also included in recent approaches to define standardized classifications recently, such as the Y02 of EPO, or the IPC Green Inventory of WIPO. However, both of these classification schemes still do not account for important technologies, especially with regard to cross-cutting and process specific energy efficiency technologies. Furthermore, our technology classes encompass much more than only energy related technologies. Thus, for patents and publications, we use the Fraunhofer ISI sustainability technology database, which also uses specific key word based search strategies in order to derive patents for resource efficiency which do not form a separate patent subclass (see Walz and Marscheider-Weidemann 2011). With regard to trade data, there is a separate 6-digit level for some technologies. For other technologies, it was necessary to identify the key technological concepts and segments. They were transformed into specific search concepts for the publication, patent and trade data. This required substantial engineering skills. Furthermore, there is a dual use problem of the identified segments: the data only indicate that there is a technological capability which could be used for sustainability innovation – not necessarily that these technologies are already implemented in a way that the environmental burden is reduced. Thus, in order to reflect that ambiguity, the terms “green innovation” or “green technology”, which are used in the text, have to be interpreted as potentially relevant technologies for reaching the green SDGs.

With regard to country coverage, we have selected a 32 country sample for performing the analysis in sections 3 and 4. These countries consist of OECD countries and Newly Industrializing Countries (NICs). From this sample, we formed country clusters that deviate slightly from the established categories. Thus we distinguish between “traditional OECD” countries on the one hand, and other countries for which we use the label “Newly Industrializing Countries”, on the other. The latter category contains some countries which actually belong to the OECD (e.g. South Korea, Mexico), which makes it difficult to label them as “the South”. In section 5, the data covers trade between all countries listed in the UN-COMTRADE. However, selected countries with specific importance for the overall development are also depicted in more detail.

3.1 General capabilities for sophisticated technologies and innovations

The general capabilities necessary for sophisticated technologies and innovations (and hence also important for green SDGs) are often characterized based on input indicators in terms of R&D intensity (R&D expenditures at the national level and by industry, related to the Gross Domestic Product GDP). The quantitative data on innovation capacity give a first indication of the general research conditions for innovation. The national R&D intensity is rather different among the country sample. It reaches from very small numbers far below 1%, e. g. for Indonesia or the Philippines, to values between 2 and 3% - which are typical for some advanced NICs, e. g. for Singapore, Taiwan or South Korea, or traditional OECD countries.

Instead of looking at single quantitative indicators alone, the results of World Economic Forum (WEF 2015 are used, which use two composite indicators: one for technological readiness, which indicates the ability of countries to adopt existing technologies which enhance the productivity of its industries, and another one for innovation capability, which accounts for the availability of innovation financing and research institutions, among others. This data is based on the Opinion Survey of WEF, using a scale between 0 and 7. The results indicate that newly industrializing countries, in general, still have lower innovation capabilities (Fig. 1). However, some of the newly industrializing countries have been moving up, and have closed the gap.

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3.2 Governance

Transparency International builds a composite index which draws on corruption-indicators collected by a variety of institutions. The higher the index value, the less prevailing is corruption perceived to be. This index is normalized between 0 and 100. Furthermore, we look at data from the World Bank, which collects a dataset summarizing the views on the quality of governance provided by a large number of enterprise, citizen and expert survey respondents in industrial and developing countries. The data of the World Bank covers different aspects of governance, and is normalized between 0 and 100. We build the average of the subset for the three areas “voice and accountability”, “political stability/no violence”, and “government effectiveness”, and use it as a composite index.

The results of these indicators show that newly industrializing countries, in general, have lower indicator values for both the World Bank governance and the Transparency International Corruption Prevention Indicator (Fig. 2). Thus, as may be expected, empirical data indicates that general capabilities with regard to governance are less developed in emerging economies.

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3.3 Stringency and enforcement of environmental policy

Many of the widely debated policies to foster green innovations – e.g. emissions trading, feed-in-tariffs or environmental standards – are necessary to achieve diffusion of green technologies. Thus, there is a clear difference to other “normal” innovations: It is not (only) the lead users, which are important for new preferences to be shaping a market, and which support innovations via user-producer interrelationships. The demand for green innovations must be initiated by some form of environmental regulation. This does not necessarily involve public spending or public procurement. Thus, the stringency with which the countries pursue environmental targets, and the enforcement of environmental policy, also act as general framework conditions for successful demand stimulation within the innovation system. Various studies have shown that these factors are crucial for inducing innovation effects towards new or improved sustainability technologies.

We use the data from the World Economic Forum Opinion Survey (2015). This data uses a scale between 0 (no stringency/enforcement) and 7 (high stringency/enforcement). By and large, traditional OECD-countries still show a higher stringency and higher level of enforcement of environmental policy than NICs (Fig. 3).

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4.1 Publications

Scientific publications belong to the intermediate innovation indicators, which show the level of knowledge creation. The development of publications can be used as an indicator for the change in the importance of scientific fields over time. Figure 4 shows the publication dynamics in the field of the green technologies, compared with the dynamics of all publications covered by WoS. It can be seen that publications on green technologies show much higher dynamics than the average of all publications, and have been accelerating after 2004. This increase in dynamics has been especially strong in the NICs. This has resulted in a strong increase of the share of the publications from the NICs (Fig. 5). Indeed, in 2014, about half of all publications came from the NICs. Clearly, it can be argued that the topic of green technologies is increasingly taking a hold in the scientific community of NICs.

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The analysis of the 32 countries reveals that the major part of this increase in the share of NICs can be attributed to China, which almost accounts for one quarter of the green technology publications (see Fig. 20 in the annex). In contrast, the US has lost its leading position and accounts for another 15%. Other major countries are Germany, Korea, Japan, UK and Italy, with about 5% world share each.

In addition to its emphasis on a technological field, a country’s share reflects also the size of the country and its general orientation with regard to publishing in journals covered by WoS. In order to adjust for different country sizes, we also calculate the publication intensity. The publication intensity is highest in Denmark, followed closely by Singapore, Switzerland and Sweden. Taiwan and Korea also achieve values which are above most traditional OECD countries. The values for the other NICs, however, show that there still is considerable distance to catch up with traditional OECD-intensities (Fig. 6).

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In order to also adjust for the overall level of publication propensity in the countries, we look at the publication specialization. In general, the specialization within the OECD countries has been reduced; most of them show a negative literature specialization. The development within the NICs has not been homogenous, however. Some have been increasing their specialization, others not. However, all of the Asian NICs show a positive specialization. Thus, especially Asian countries seem to be the ones in which academic research systems have been taking up the environmental challenges (Fig. 7).

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4.2 Patents

Next to publication dynamics, Figure 4 shows the patent dynamics in the field of green technologies, compared with the dynamics of all patents. By and large, the dynamics have been the same until 2007. Since 2007, the dynamics in green technologies have been exceeding the average. This increase in dynamics has been especially strong in the NICs (see Fig. 5). This has resulted in a quadrupling of the share of the patents from the NICs. However, with a share of 4% in 2000, the starting point of the NICs has been much lower compared to their share in publications. Thus, the share of the NICs in patents in 2012 was still below their share in publications in 2000. Clearly, it can be argued that the topic of green technologies is increasingly taking a hold in the community of NICs, but the level is still much lower than in the North.

The analysis of the 32 countries reveals that the major part of this increase in the share of NICs can be attributed to China (plus 5 percentage points), Korea (plus 4 percentage points), and India (plus 1 percentage points). Among the traditional OECD countries, Japan has been increasing its share substantially. The US and Germany have lost shares, but are still clearly No. 2 and 3, respectively (see Fig. 21 in the annex).

In order to adjust for country size, we calculate the patent intensity per million of inhabitants (Fig. 6). The highest intensity can be found in Finland, Denmark and Switzerland. Austria, Germany, Japan and Sweden also show considerably high patent intensities. With the exception of Korea and Singapore, the patent intensity of the NICs is considerably lower than the patent intensity even of the laggards among the traditional OECD countries. Interestingly, the patent intensity is higher than the literature intensity for a couple of traditional OECD countries, especially for Austria, Finland, Germany, and Japan. In contrast, for all of the NICs, the patent intensity is substantially lower than the publication intensity. Clearly, the distance between NICs and traditional OECD countries is still substantial with regard to patent output.

In order to also account for different country sizes, different developmental stages and different propensities to patent, we also calculated the RPA. Within the traditional OECD, more countries show a positive specialization than a negative one. The development has been very mixed, however, with about half of the OECD countries improving, the other half reducing their specialisation. The strongest specialization is found for Denmark, Finland and Austria. Among the large countries, Germany and Japan show a positive, the US a negative specialization. In contrast to the specialization pattern in literature, there is no clear cut patent specialization pattern among the NICs. Indeed, literature and patent specialization quite often show different signs. In contrast to the specialization pattern in literature, green technologies are not a field which has taken a particular stronghold in the Asian countries. China and India show a negative, Korea an average patent specialization. Brazil and Mexico, on the other hand, show a positive patent specialization (Fig. 8).

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4.3 Exports

The development of green exports has been following the overall development of exports very closely. Both total and green exports more than doubled between 2000 and 2008, were reduced by the financial crisis in 2009, bounced up again until 2011, and have kept their level since then more or less. From the early 2000s until 2013, the share of NICs in world green exports rose from 18.7% to almost 31.6%. This increase was a little bit stronger than the overall increase in NICs’ share of total exports, which rose from 22% in the early 2000s to 32% in 2013.

The major exporters are Germany, China and the US, with export shares above 10%, followed by Japan and Italy (Fig. 9). In general, the export shares are more equally distributed compared to patents and publications. In order to adjust for country size, we have calculated the export ratio of green exports to GDP of the respective country. This indicator shows the importance green exports have achieved for the economies of the respective countries. This ratio is especially high for Mexico, Singapore, and Thailand. Among the traditional OECD countries, the export oriented green industry is especially important in Austria, Belgium, Germany and Denmark.

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The different export ratios are also influenced by a different openness of each respective country with regard to trade. Thus, we also calculated the export specialization, which indicates the importance of a technological field within each country compared to all other fields. The data shows that half of the analyzed traditional OECD countries show a positive export specialization. The other half has an average or negative export specialization. The situation is also heterogeneous for the NICs. Six out of 15 countries show a positive export specialization.

It is also interesting to see how export and patent specialization differ (Fig. 10). This is less the case for the traditional OECD countries, but very common for the NICs. Furthermore, it has to be kept in mind that the comparative level of patenting in NICs is lower than for exporting. All this implies that it seems to be possible to be successful in exporting without building up an above average pool of domestically generated technological knowledge. This underlines the importance of the manifold channels of technology transfer, i.e. innovation partnerships, licensing, FDI and embodied capital. Furthermore, another possibility might be that NICs are able to achieve their export success with a different strategy which builds less on cutting edge technological knowledge. It is these sorts of questions to which we turn in section 5.

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