How Should We Study the Relationship between Environmental Regulation and Innovation?
This paper offers a conceptual framework for understanding the relationship between environmental regulation and innovation. It seeks to widen the concepts of innovation which are used in environment-oriented studies, while at the same time challenging th
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Keith Smith STEP Group (Group for studies in technology, innovation and economic policy) Storgaten 1, N-0155 Oslo Norway
Gerhard Becher PROGNOS, Basel Switzerland
Keywords. production chain, systems approach, jiliere, environmental innnovation.
1 Introduction This paper offers a conceptual framework for understanding the relationship between environmental regulation and innovation. It seeks to widen the concepts of innovation which are used in environment-oriented studies, while at the same time challenging the idea that regulation is either a straightforward facilitator or inhibitor of innovation. With respect to innovation, we present a 'systems' framework, one which emphasises the collective and interactive character of innovation, as an appropriate entry point for analysing the complex institutional, social and networking aspects of the impacts of regulation. With respect to regulation, we seek to challenge the stimulus-response model of the impacts of regulation on innovation. We contest the view that regulation either stops or starts innovation in J. Hemmelskamp et al. (eds.), Innovation-Oriented Environmental Regulation © Springer-Verlag Berlin Heidelberg 2000
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R. Kemp, K. Smith, G. Becher
any simple way. Rather, we take the view that regulation shapes or modulates innovation across networks of firms, and across groups of related industries. A productive way to think about the shaping of innovation is that firms innovate as a method of removing constraints. These may be constraints on the size or geographical location of the market they face, or constraints in labour supply, or finance, and so on. A significant constraint is the regulatory environment, which does not necessarily hinder innovation, but rather says that if firms are to innovate then they must do so with respect to certain performance parameters.
2 Characteristics of Innovation There is a huge literature on innovation. Within it there are two types of approaches: those which take as their starting point the individual innovator, and those which emphasize the economic, institutional and social system within which innovation occurs. In the first type of approach there is often a tacit assumption that firms innovate mainly on the basis of technological opportunity - that is, that the rate of innovation is governed by the scope of available technological opportunity, and that the direction of innovation is explained by whatever it is (often unexplained) which generates these opportunities. From this perspective, regulation is something which limits the ability to exploit the available technological opportunities, and is therefore something whose effects are mainly to slow down innovation. This of course leaves a major gap in our understanding, since from a regulatory point of view it is determinants rather than rates of innovation which are at stake. 'Systems' approaches to innovation are founded on one of the most persistent themes in modern innovation studies, namely the idea that innovation by firms cannot be understood purely in terms
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