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.
Empirical studies using innovation indicators indicated that NICs have been increasing their general capabilities in the 2000s (Walz and Marscheider-Weidemann 2011), but more so specific technological capabilities. The paper is motivated by the following research questions:
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What is the positioning of countries with regard to general innovation capabilities? This requires national comparisons of these capabilities, which are addressed in section 3.
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What are the dynamics of green innovations before and after the financial crisis? Do we see that the South has been developing capabilities and thereby caught up? What countries are positioning themselves especially strongly towards green innovations? Section 4 deals with the empirical analysis of this question.
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Do we see an indication of whether the innovations are dominated by one paradigm with technological leaders and followers, or is there also an indication that segmented markets for sustainability technologies are emerging, which in addition to a Northern segment also account for a paradigm which more strongly draws on co-evolution of technologies and a socio-economic environment specific to the South? Section 5 is devoted to that research question.
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.
In addition to general capabilities, specific competences for sustainability technologies are required. Innovations in environmental technologies have to be defined in order to be analyzed with indicators. The following technological fields were included under the heading of green technologies: (1) energy efficiency, (2) environmentally friendly energy supply technologies, (3) material efficiency and waste management, and (4) water technologies. Thus, we cover the central technological fields which make up low carbon and resource efficiency. Table 1 shows the relationship between the technological fields and the SDGs. Given the environmental focus of our paper, not all of the SDGs are directly addressed. Nevertheless, there is a direct relation between technologies and SDGs for 11 out of the 17 SDGs. In general, the technological fields relate to various SDGs, and vice versa. Thus, specializations of countries in specific technology classes do not necessarily indicate an emphasis on a specific SDG or a division of labor between the countries to achieve the SDG.
Table 1 Main relation between selected technology classes and SDG
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.