the greening of technology and models of innovation

NORTH-

The Greening of Technology and Models of Innovation

CHRIS FREEMAN

ABSTRACT

The study suggests that the question of whether the world economy can move to a new and sustainable pattern of growth remains open. It is both a question of methods of regulation, economic incentives, and other institutional changes and a question of technological innovations. Although more attention has been paid to incentives and institutions, the potential offered by continuous technological change has been rather neglected. This emerges as a central issue in the "limits to growth" debate and its resulting world models. The study argues that, to realize large technoeconomic system transitions, society needs to develop a new model of innovation, combining some features of the much criticized linear model with features of the systemic innovation model.

"Linear Model" of Innovation No model of the innovative process has been more frequently attacked and demol-

ished than the so-called "linear model of innovation" (Figure 1). At one time it was almost impossible to read a book or an article on technology policy or technological forecasting that did not begin or end with such a polemic. The notion that innovation begins with a discovery in "basic science," proceeds with an application or invention derived from this fundamental work ("applied science"), and ends with the development of a new product or process (an "innovation") was indeed at one time quite influential.

However, this linear model was never in fact so strongly upheld as the intensity of the polemical critique might suggest. It is actually quite difficult to find a clear statement of the linear theory from someone who firmly believed in it. Perhaps the best source is in the document that advocated setting up the National Science Foundation in the United States after the second world war. In his proposal, entitled "Science, the Endless Frontier," Vannevar Bush [4] did indeed outline a linear model of science, technology, and innovation, and this report was certainly influential among policy-makers both in the United States and elsewhere. The linear model cannot therefore be dismissed simply as a conve- nient straw man erected for the convenience of those expounding alternative ideas.

Moreover, even without a clear formal statement, an idea can nevertheless be influential among policy-makers. The expression "applied science" could itself be taken to indi-

CHRIS FREEMAN is Emeritus Professor of the Science Policy Research Unit (SPRU), University of Sussex, UK and Visiting Professor with MERIT, University of Limburg.

Address reprint requests to Professor C. Freeman, SPRU, Mantell Building, University of Sussex, Falmer, Brighton, BNI 9RF, UK.

Technological Forecasting and Social Change 53, 27-39 (1996) © 1996 C. Freeman Published 1996 by Elsevier Science Inc. 655 Avenue of the Americas, New York, NY 10010

0040-1625/96 PII S0040-1625(96)00060-1

28

A~gregate linear model:

I "° H H H--n°H I . - ° ° ,research I [, , I I Imitation

Firm.specific linear model:

C. FREEMAN

Fig. 1. Aggregate and firm- specific linear models.

cate an implicit acceptance of a linear conceptualization of science and technology, and the use of this expression was at one time more common than it is today. Finally, the implicit or explicit acceptance of an essentially linear model was by no means confined to those concerned with science and technology policy. Historians have always been preoccupied with problems of "technological determinism" in the development of the economy and of "economic determinism" in the development of society. The debate surrounding the linear model of innovation is actually part of a much wider debate on historical development more generally. Thermodynamics was frequently cited as an example where the technology and the industrial applications clearly preceded the scientific theories.

However, before proceeding to place the innovation controversy in a much wider context, it is essential to recognize the circumstances surrounding the advocacy of the linear model. There were two special features of the development of science and technology policy in the 1940s and 1950s that gave rise to the widespread influence of this model, whether implicit or explicit. First of all was the development and use of nuclear weapons in the second world war and the perceived potential of nuclear power in the production of energy. Secondly, there was the determined effort of the scientific community in the United States and elsewhere to lobby for more stable and expanding public expenditure on scientific research in the period after the second world war. Each of these factors merits some brief consideration.

The use of nuclear weapons may not have been justifiable in military and ethical terms and may indeed have been motivated as the first step in the cold war rather than the last act of the second world war (as plausibly argued by Blackett [3] in his brilliant study of the "Military and Political Consequences Of Atomic Energy"). Nevertheless, there can be no doubt that the use of "The Bomb" was by far the most spectacular event of the war and perhaps of the entire 20th century. It was widely and immediately perceived as one of the turning points in human history, raising the possibility of destructive warfare on a scale never previously imagined. At the same time it was very widely believed that atomic energy offered the possibility of cheap and abundant electric power for the indefi- nite future. In this context, it was hardly surprising that this example was extraordinarily influential in the early post-ware debates on science and technology policy. Indeed, many of the early advisory bodies on science policy in many countries were explicitly (and even uniquely) concerned with atomic energy, nuclear power, and nuclear weapons. In several countries, expenditure on R&D in this area accounted for well over half of total government expenditure on R&D. In almost all countries, physicists played a leading role as science advisors and as chairmen or leading members of advisory boards, committees, or councils dealing with science and technology policy. The prestige of science in general and of physics in particular has probably never been higher.

GREENING OF TECHNOLOGY 29

Moreover, the example of atomic energy appeared at first sight to be a clear example of the linear model. Conformity to the linear model nevertheless does not preclude large surprises and unexpected discoveries (see Tom Schelling's contribution in this special issue). Fundamental work in nuclear physics clearly preceded any applications by several decades. Scientists such as Rutherford, who worked on particle physics in the early days, were not motivated by the prospect of future applications and indeed sometimes denied their possibility. The engineering problems in the development of weapons and the interactions between engineers and scientists in the Manhattan Project were still shrouded in secrecy, whereas those involved in the development of nuclear power still lay in the future.

It is scarcely surprising that it appeared to scientists as a heaven-sent opportunity to justify large and increasing expenditures on scientific research and that this justification was widely accepted. Nor is it surprising that, with the advent of the cold war and the Korean War in 1950, military agencies in the United States and elsewhere could be num- bered among the most consistent and reliable supporters of substantial government expenditures on basic research. The case appeared to be very convincing.

However, the use of this illustration as a justification for expenditures on basic research did not then, and certainly does not now, imply a full acceptance of a linear model of innovation. Indeed Bush himself did not really believe in such a model. Long before this historians of science and technology, as well as historians more generally had recognized that the realities of the innovative process were far more complex than this simplistic view.

"Systemic Model" of Innovation The recognition of the role of demand is implicit in the old proverb, "necessity is

the mother of invention," and there have been numerous examples of inventions and innovations that were initiated and driven largely in response to pressing social demands. Even in the case of basic scientific research, some historians have maintained that fundamental scientific theories were driven by economic pressures. At the 1930 International Congress on the History of Science, the Russian delegates advanced this proposition in a series of papers, of which the best-known is Hessen's paper on Newton's "Principia" [ 14].

Theories of "science-push" and "demand-pull" have been hotly debated by economists, sociologists, and historians before and since that congress [1, 2, 24, 33, 34, 37]. This debate still rumbles on [10], but a widely agreed synthesis has emerged that was well summarized in the so-called "Maastricht Memorandum" edited by Soete and Arundel [35]. This did not deal specifically with the history of science but attempted to provide "an integrated approach to European innovation and technology diffusion policy."

Already in the 1960s, the emphasis of science and technology policy in the OECD countries was shifting away from the implicit acceptance of the linear model toward a more balanced approach. The objectives of economic growth and competitiveness came to predominate in policy-making, and with this shift in priorities came a recognition of the interdependence of market demand and advances in technology and science. Multiple inputs to innovation from a wide variety of sources came to be taken into account and the primacy of hard science was no longer taken for granted. Engineers and economists began to play a more significant role in policy-making along with physicists and other representatives of "hard science" [6, 36].

Numerous case studies of innovation [9] brought out the importance of flows of information and knowledge between firms as well as within firms. Moreover, the results of the empirical research pointed to the importance both of flows to and from sources

30 C. FREEMAN

of scientific and technical knowledge a n d of flows to and from users of products and processes.

The distinction between radical and incremental innovation is highly relevant here as is the pattern of diffusion of an innovation. In the early stages of a truly radical innovation, scientific and technological inputs are likely to he prominent, even if they do not provide the original impulse. Katz and Phillips [15] have shown that in the early days of the electronic computer (arguably the most important 20th century innovation), science and technology push predominated and even industrialists as knowledgeable as T. J. Watson (Senior) maintained there was and would be no market demand. Other studies (e.g., [22, 23]) have shown that the science "constituency" was also prominent in originating and shaping later radical innovations in the computer industry.

Nevertheless, in the 1960s and 1970s demand-led theories of innovation made a considerable impact on policy-makers. The empirical survey of over 500 innovations made by Myers and Marquis [25] appeared to justify the demand-pull approach, whereas on a more theoretical level the work of Schmookler [34] provided a more sophisticated historical justification. He did not entirely deny the independent role of basic scientific research but sought to demonstrate through the painstaking use of very detailed U.S. patent statistics that usually the peaks and troughs of i n v e n t i v e activity lagged behind the peaks and troughs of i n v e s t m e n t activity. From this he drew the conclusion that the main stimulus to invention and innovation came from the changing pattern of demand as measured by investment in new capital goods in various industries.

Scherer [33] tested Schmookler's hypothesis for a more comprehensive set of U.S. manufacturing industries and found a much weaker relationship. Verspagen and Klein- knecht [37] also found Schmookler's own data showed a weaker relationship than he had claimed. Scherer made an original analysis of cross-sector flows of patent origin and use that demonstrated that the link for inventions sold across industry lines was at least as strong as for those that represented internal processes to their originators.

Pure demand-pull theories were already strongly criticized in the 1970s (e.g. [31]). However the coup de grace was given by Mowery and Rosenberg [24] in their devastating review of "Market Demand and Innovation." They showed that empirical studies of innovation that were often cited in support of "demand-pull" did not in fact justify these conclusions and indeed that the authors themselves repudiated this interpretation (e.g. [9, 17]. Mowery and Rosenberg further pointed to the confusion in the literature between "needs" and "demand" and between "potential demand" and "effective demand." Because human "needs" are extremely varied and often unsatisfied for long periods, they cannot alone explain the emergence of particular innovations at a particular time. Innovation should not be viewed as a linear process, whether led by demand or by technology, but as a complex interaction linking potential users with new developments in science and technology.

The majority of innovations characterized as "demand led" in the Myers and Marquis survey were actually relatively minor innovations along established trajectories, and the same was true of the vast majority of patents analyzed by Schmookler. The Mowery and Rosenberg critique of demand-pull was further reinforced by research using patent statistics and Schmookler's own method [38]. In her study of the chemical industry, Walsh [33] made use of statistics of scientific papers as well as patents and related these to measures of output, investment, innovation, and sales after the manner of Schmookler. As in Schmookler's work, the pattern of leads and lags was by no means so clear-cut as to put the issue beyond all doubt. But as with his work, there was evidence of synchronicity in the pattern of economic and technical developments, i.e., the major upsurge of produc-

GREENING OF TECHNOLOGY

TABLE 1

Main Characteristics of a Systems Model of Technical Change

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1. Multidirectional links at the same point in time between the stages of technical change. 2. Cumulative processes over time can lead to feedbacks and lock-in effects.

3. Technical change is dependent on knowledge and the assimilation of information through learning.

4. The details of the development path and diffusion process for each innovation are unique. 5. Technical change is an independent and systemic process.

Source: Reference 35, page 36.

tion and investment in each sector (petrochemicals, dyestuffs, drugs, and synthetic materials) was accompanied by a remarkable increase both in the numbers of patents and in the output of related scientific publications.

The most interesting result, however, was the evidence suggesting that a "counter- Schmookler" pattern was characteristic of the early stages of innovation in synthetic materials, drugs and dyestuffs, changing to something more closely resembling a "Schmookler" type pattern once the industry "took off." Qualitative analysis in all four cases confirmed the importance of early scientific and technological breakthroughs permit- ting and triggering an upsurge of inventive activity and technical innovations. The work of Fleck [7, 8] on robotics showed a similar pattern of early science-technology push, followed by numerous system improvements in specific applications driven by users inter- acting with suppliers.

These results of empirical research pointed to the resolution of the persistent controversy between adherents of "demand-pull" or "market-led" theories of innovation and advocates of "technology push" or "science-driven" theories. One of the achievements of innovation research has been to undermine linear models of innovation, whether supply or demand driven and to replace them with more sophisticated models (see also [26, 32]), which embody the numerous interactions and feedback loops during both innovation and diffusion as summarized in the Maastricht Memorandum.

The main features of a systemic model of innovation were summarized on the Maas- tricht Memorandum as shown in Table 1. As the memorandum points out, the policy implications of such a systemic model are very different from those of the linear model. Feedback loops and interdependencies can be important at every stage, so that networking and cooperation between research institutions and firms should be continuously encouraged. If rapid economic growth is the main policy objective that is served by technology, then promotion of "best practice" and rapid diffusion of innovations tend to become more important than the achievement of very radical original innovations based on new fundamental scientific discoveries.

The very high costs of some rather large-scale advanced technology projects, such as the fast breeder reactors, Concorde and other aircraft projects reinforced disillusion with government expenditures on "high tech" projects and led to a greater emphasis on productivity and higher rates of return to new investment. During the 1950s and 1960s, the diffusion of U.S. "best practice" techniques in Europe, Japan, and elsewhere led to very big improvements in productivity and to a process of closing the "technology gap" and the productivity gap within the OECD.

"Limits to Growth" Debate The quarter century after the second world war saw the most rapid economic growth

the world had ever experienced. Not only Western Europe and North America but also

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TABLE 2 Final Energy Intensity' of GDP (Tons oH equivalent per 1,00@ ECU) 1973-1993

Country 1973 1988 1993

Belgium 0.64 0.49 0.47 Denmark 0.46 0.31 0.32 Germany 0.52 0.40 0.39 Greece 0.51 0.60 0.52 France 0.44 0.36 0.38 Ireland 0.59 0.57 0.43 Italy 0.46 0.36 0.37 Luxembourg 1.51 0.74 0.65 Netherlands 0.59 0.47 0.44 U.K. 0.62 0.45 0.44

EC 0.52 0.41 0.40

° Energy Intensi ty-Gross Inland Consumption divided by GDP at 1980 prices and 1980 exchange rates. Source: Eurostat (CEC, Panorama of Industry, 1994); updated from Eurostat (CEC, Energy, 1990 through

1995), Eurostat Energy Statistics, EC, Eurostat, Luxembourg.

Japan, Eastern Europe, and a few Third World countries (the so-called newly Industrializ- ing Economies) all experienced high rates of growth, averaging about 4070 of GNP per annum for quite long periods, and in the case of Japan, Korea, and a few others, ap- proaching 10070. These achievements were based on the rapid diffusion of mass and flow production technologies, using cheap and abundant energy-mainly oil and g a s - a n d vast quantities of steel and newer synthetic materials based on petrochemicals.

However, the emphasis on economic growth policies certainly did not go unchal- lenged even in the 1960s. The very success of mass production, accompanied as it was by mass education, mass tourism, and mass consumption of standardized products and services, led to some widespread questioning of the future possibilities of continued economic growth. These problems came into great prominence with the publication in the early 1970s of various computer models of the future of the world economy. The best-known model was based on the work of Jay Forrester at the Massachusetts Institute of Technology (MIT), supported by the Club of Rome, and popularized through a best- selling paperback entitled Limits to Growth [18]. These and similar models suggested that the world economy and population would collapse early in the 21 st century if growth continued, because of exhaustion of materials supply, the pollution effects of mass industrialization, or a Malthusian food shortage because of insufficient agricultural land.

Critics of these models pointed out that in any computer modeling assumptions determine the outcome ("Malthus in, Malthus out"). The critics argued in particular that technical and social changes were either neglected or underrepresented in the MIT equations and models and that it they were included, then a pattern of sustainable growth or at least of a more prolonged period of world economic growth could be envisaged in the 21st century, during which the Third World countries Could reasonably hope to catch up in living standards with the richer countries [5, 12].

The materials- and energy-intensive pattern of growth characteristic of the U.S. economy in the 19th and 20th centuries would not necessarily be the standard for other countries in the next century. If materials became scarce and expensive, or if their use involved unacceptable pollution hazards, technical changes could (and very likely would) lead to economizing in and substitution between materials, to recycling, to innovation in processes and effective antipollution technologies, which would lead to a different pattern of growth. That this critique was not too far removed from the realms of the possible is suggested by Table 2, which indicates that in the leading industrial countries


there was indeed a significant break in the trend of energy consumption during the 1970s and 1980s. Part of that reduction was due to structural change, but a major part of the reduction was also due to energy-saving and material-saving technologies. Information technology can further reduce the number and size of components in many products and facilitate designs and process control systems that reduce rejects and waste.

However, it would certainly not be justifiable to conclude from such evidence that the problems of transition to sustainable growth have been solved for the world economy. The MIT modelers were right to point out that the industrialization of China, India, Brazil, and other Third world countries would indeed lead to a huge increase in aggregate consumption of materials and energy even though the Science Policy Research Unit (SPRU) critics may also have been right that their industrialization need not follow such an energy- and materials-intensive pattern as that of the United States or Europe. There are also some signs that the reduction in materials- and energy-intensity per unit of GDP, which was achieved in the period of high energy prices in the 1970s and 1980s in the OECD countries, is no longer being sustained now that energy prices have once again fallen to relatively low levels.

Information and communication technology (ICT) can help a great deal in saving energy, materials, and transport costs. Whether it does so, however, is a matter of social and economic policies, as well as of technology and science policy. Consequently, whether the world economy can move to a new and sustainable pattern of growth remains an open question. It is both a question of new priorities for public and private R&D to nurture a new range of possibilities in such areas as renewable and "cleaner" energy sources and energy and materials conservation devices and a question of new regulatory mechanisms to ensure their worldwide diffusion. The latter may be the more difficult problem, as the difficulties with the carbon tax have shown.

The final section of this article discusses the kind of technology policies and economic policies that will be needed in the light of the earlier discussion on linear and systemic models of innovation. The debate between the MIT modelers and their critics in SPRU and elsewhere clarified some of the main issues surrounding "Limits to Growth" and "sustainable development." As the SPRU critics acknowledged, the MIT publications, circulating in millions of copies in many languages, performed an extremely valuable role in alerting worldwide public opinion to the dangers of global pollution hazards and the headlong pursuit of materials-intensive growth. The MIT modelers were originally very pessimistic about the possibility of a change in this trajectory but acknowledge this possibility in their more recent book [19]. Their SPRU critics were rather more optimistic about the possibilities of both institutional and technical change.

Models of Innovation and a New Paradigm of Sustainable Development The models of the world economy developed by the Systems Dynamic Group and

MIT were of course systemic models in the sense that they incorporated feedback loops and interdependencies between the various subsystems included in the models. However, in the earlier models, because little attention was paid to the possibilities of technical and institutional change, and since the behavior within the subsystems was largely governed by trend extrapolation, the outcome of this interaction took the form of catastrophic collapse of the entire system by 2030 or 2040 or thereabouts. The method of trend extrapolation in most of the subsystems, although strongly criticized by other groups, had a certain justification if the main purpose of the modeling exercise was to demonstrate what would happen if existing trends continued unchecked.

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Many of the critics maintained that within the economic system there were some self-regulating mechanisms that would tend to bring about modification or reversal of trends before the system reached the point of catastrophic collapse in the 21st century. Thus, most economists argued that price changes would automatically occur in the event of specific material shortages. Higher prices of specific materials would lead to a process of substitution by other more abundant materials, or to an increase in recycling, or to greater economy in use of materials, or to more intense exploration of new sources, or to new processes for using leaner ones. Technologists argued that all of these changes would be facilitated by new R&D, as well as by the diffusion of existing knowledge and techniques. Similarly, in the case of agricultural production, the SPRU critics and others argued that even through the diffusion of existing techniques it would be feasible to feed a much larger world population. If allowance was made for a higher rate of technical change through new R&D, then even greater increases in production could be achieved. According to the SPRU analysis, the main causes of hunger and famine were income distribution, trade, and agricultural policies rather than the technical problems of increasing food production. Many countries wee actually restricting their agricultural output. Finally, in the case of the threat to human populations from pollution hazards, critics of the MIT models argued that the simplifying assumption that all hazards could be aggregated as a necessary effect of industrialization could not be justified. Each hazard had its own specific characteristics, and some of them at least could be reduced or contained by appropriate legislation or economic incentives and deterrents.

Looking back on this 1970s debate with the benefit of hindsight, it is easy to see that a great deal depends on the systemic model of innovation. Only if the science and technology system is highly responsive to social and economic demands and only if the economy is highly responsive to institutional change and social policies would it be possible to avert the type of catastrophes predicted by the MIT models at some time during the 21st century. It is important to realize that when the SPRU modelers changed the assumptions about technical change in the MIT model this had the effect of postponing the predicted collapse but not necessarily of preventing it altogether. Only a continuing high rate of technical change and a set of institutional changes, such as those affecting demographic trends and pollution hazards, would prevent catastrophe indefinitely.

Most of the participants in the debate came to agree that both types of change would be needed and indeed that they interact with each other (e.g., new recycling technologies need good waste collection systems; new regulations or laws to limit hazards need accurate measurement and detection technologies, etc.). Most of those concerned with world models also came to agree that it was both politically impossible and ethically unacceptable to deny to the peoples of the Third World the possibility of raising their living standards to catch up with those of the OECD countries, even though their specific patterns of production and consumption would undoubtedly differ from those of the United States. A revised version of the MIT model [19] was published, which amended some of the assumptions relating to technical change and envisaged the possibility of a more optimistic scenario.

However, with the increasing concentration on the "greenhouse effect," more and more attention has been paid to institutional change and rather less to technical change. In particular economic incentives and penalties have moved to center stage. Economists, such as Pearce [27, 28] have argued persuasively that in a market economy it is essential that prices in the market should reflect the true longterm costs of environmental degrada- tion: "the polluter must pay." Taxes and subsidies should be used to realign market prices to conform more closely to long-term social costs [16]. It is of course recognized that


some hazards are so severe and so immediate that continuing pollution simply cannot be allowed at all, and outright prohibition is the only course. Still other pollutants such as chlorofluorocarbons (CFC) may be tolerated for a short period until industry finds alternative methods, and may then be prohibited.

In practice most countries have begun to use a combination of economic incentives and legal regulation systems. But the effectiveness of most of these methods depends on the degree of public support for the policies. Consequently methods of public persuasion and mobilization of public opinion also play an important role. Historically, voluntary groups and organizations have made the major contribution to this mobilization, and this was indeed the major achievement of the MIT models and many other similar publications and activities.

Unfortunately, despite many successes for the environmentalist movement and despite the undoubted fact that this movement has changed the nature of political debate in many countries over the past 25 years, it has not generally been strong enough to overcome opposition to energy-saving proposals such as carbon taxes or petrol taxes, or to reverse the increase in automobile and air traffic, or to contain or reverse many other pollution hazards.

The reversal of most of these hazards depends not only on methods of regulation, on economic incentives, and on other institutional changes but also on continuing technical change. In fact, some technical breakthrough with renewable sources of energy could make an enormous difference to the prospects.

As already pointed out, ICT offers many possibilities of energy and materials saving, both through more efficient process control and monitoring and through reduction in number and size of components in many electromechanical systems. They offer even more radical possibilities through "telecommuting," enabling people to work at home and avoid the journey to work at least for some days in the week. They might also reduce the need for air travel through teleconferencing techniques. It must be said however that these possibilities have been slow to materialize. Consequently, it would be difficult to maintain that the widespread diffusion of ICT itself is so far averting the dangers foreshad- owed in the MIT models.

This indicates one of the major problems with reliance on the current versions of the systemic model of innovation. In the case of incremental changes to existing technological trajectories, it works rather well. The rise in energy and material prices in the 1970s did lead to numerous "retrofitting" types of improvement in energy-saving systems and improved efficiency in existing production and transport systems. Market prices however reflect short- and medium-term change in supply and demand rather than those factors that may affect the global environment in the longer term. This point is widely accepted by economists, but the political system and the economy are now so much driven by short-term market forces and ideology and by short-term electoral advantage, that long- term policies are crowded out. Moreover, the discounting procedures adopted for most investment decision-making virtually rule out consideration of long-term costs and bene- fits. Finally, the "lock-in" mechanisms identified by evolutionary economists are so strong that they inhibit radical shifts of technoeconomic paradigms.

The type of paradigm change identified by Carlota Perez [29, 30] is indeed taking p lace- a shift to an economy based on intensive use of computer-based information and telecommunication technology. Whereas the debate on long waves and Kondratiev cycles continues, most of the participants accept the point that successive qualitative transforma- tions of technological systems have indeed been a feature of capitalist industrial development [11]. No historian denies the importance of the diffusion of steam-power, electric

36 C. FREEMAN

power, mass production of automobiles, or computerized systems. However, past experi- ence indicates that a new paradigm takes a long time to become established because of the lock-in phenomena and various types of inertia in established systems. As Perez [29] points out, the gestation period can be half a century or more, as the examples of the steam engine, electricity, and computers all demonstrate. Moreover, even after these new technologies become dominant in the economy, older technologies and infrastructures [13] continue to coexist with the new ones for a long time.

Consequently, the forthcoming dominance of ICT cannot be taken to imply the imminent disappearance of the mass production and use of automobiles, nor the rapid substitution of renewable energy sources for oil and gas. On the contrary, various organi- zational innovations in the Japanese automobile industry and the use of electronics in traffic control systems and automobile design are likely to prolong the expansion of this industry. Whereas we can hope for some amelioration of the worst hazards o f environmental pollution in the early decades of the next century, it will probably take a further paradigm change beyond the ICT paradigm to assure long-term sustainable development.

What does this imply for technology policy and for the "systemic model" of innovation? The authors of the Maastricht Memorandum confront this problem head-on:

The use of science and technology policies to achieve environmental goals constitutes a new focus for technology policy. Superficially, this requires a return to the emphasis in the 1950s and 1960s on public goals that were met through mission-oriented projects. However, there is a fundamental difference between older mission-oriented projects, for example nuclear, defense, and aerospace programs, and new projects to support environmentally sustainable development. The older projects developed radically new technologies through government procurement projects that were largely isolated from the rest of the economy, though they frequently affected the structure of related industries and could lead to new spin-off technologies that had widespread effects on other sectors. In contrast, mission-oriented environmental projects will need to combine procurement with many other policies in order to have pervasive effects on the entire structure of production and consumption within an economy.

The pervasive character of new mission-oriented projects to meet environmental goals calls for a systemic approach to policy. This approach results in substantial changes to the mission-oriented projects of the past. Table 3 summarizes the key characteristics and differences between the old and new models of mission-oriented projects.

The Maastricht Memorandum contains many constructive and ingenious suggestions for the promotion of technologies for environmentally sustainable development. It is a major contribution to the debate on models of innovations as well as technology policies. Nevertheless, the continued emphasis on "incrementalism" (e.g., Tables 3 and 4) may not match the scale of the transformation required in the 21st century.

In the debate on the MIT models, the critics argued that the introduction of a technical change factor of 1% to 2°70 per annum in the industrial and agricultural subsystems would be sufficient to avert catastrophe or postpone it for a long period. As we have seen (Table 2), during the 1970s and 1980s the countries of the European Community did actually achieve significant reductions in the energy intensity of final output through a combination of institutional and technical change. These reductions do show that the pattern of inputs and outputs can indeed be changed in a desirable direction over a long enough period.

Nevertheless, such examples can give a misleading impression of the aggregate trends. In many areas there is a problem of diminishing returns to energy saving and material saving based on existing technologies or minor improvements to existing technologies. It is certainly necessary to keep up the pressures toward incremental improvements in all directions. However, much greater results will be necessary to achieve absolute reductions in materials and energy consumption over the next 50 years, as opposed to the

GREENING OF TECHNOLOGY

TABLE 3 Characteristics of Old and New "Mission-Oriented" Projects

37

Old: Defense, nuclear,

and aerospace New: Environmental technologies

The mission is defined in terms of the number of

technical achievements with little regard to their economic feasibility

The goals and the direction of technological development are defined in advance by a small group of experts

Centralized control within a government adminis- tration

Diffusion of the results outside of the core of participants is of minor importance or actively dis-

couraged

Limited to a small group of firms that can partici-

pate owing to the emphasis on a small number of radical technologies

Self-contained projects with little need for comple-

mentary policies and scant attention paid to coherence

The mission is defined in terms of economically feasi-

ble technical solutions to particular environmental problems

The direction of technical change is influenced by

a wide range of actors including government, private firms, and consumer groups

Decentralized control with a large number of involved agents

Diffusion of the results is a central goal and is actively encouraged

An emphasis on the incrementalist development

of both radical and incremental innovations in order to permit a large number of firms to participate

Complementary policies vital for success and close

attention paid to coherence with other goals


relative reductions in energy and materials inputs per unit of output that have so far been achieved. Taking into account that since Third World countries will almost inevitably increase their consumption of energy and materials as they industrialize and raise their living standards, the need for radical innovations in the energy industries and energy- and materials-intensive activities is quite evident, as well as continuing incremental improvements. Rather slow progress has been made with the development and application of renewable energy technologies, such as solar power and wind power, and the resources devoted to these and to other more radical innovations are still relatively small (see, for example, [20, 21]).

Cumulative processes of diffusion and gradual changes in millions of organizations are of course essential in any pervasive change of technology system, but at the end of the day one if left wondering where the new breakthrough technologies will come from.

TABLE 4 Main Policy Options to Support the Goal of Environmentally Sustainable Development

1. Policies that can be used to guide innovation, particularly toward cleaner process technologies and those with lower input/output ratios: A. Direct regulation such as air, water, soil, and product quality standards.

B. Economic instruments such as emission and product taxes or tradeable emission permits.

C. Procurement, either through the direct support of R&D or through subsidies. D. Policies to alter the social nexus, including social persuasion, demand factors, and constructive

technology assessment. 2. Policies to influence the innovation process and to ensure the diffusion of new knowledge:

A. Wherever possible, use incrementalist principles based on short development times and small project sizes to allow a large number of organizations and firms to participate in cooperative R&D projects.

B. Decentralized control of innovation projects using a network approach to link lead research insti-

tutes, private firms, and other organizations. C. Demonstration projects and technology transfer programs.


38 C. FREEMAN

What is required for the world wide transition to a "green technoeconomic paradigm" is something more fundamental than incremental change to an information technology regime. The transition to renewable energy systems in the 21 st century will not be possible without some major institutional changes in public transport systems, tax systems, and automobile and airplane culture. Despite the important advances in wind power and solar power, it will not be possible either without some far greater R&D commitment in the public and private sector as well as procurrent policies. The long time lags involved in energy systems R&D and investment mean that these changes need to begin soon. Elements of the vanquished and much derided linear model may yet come to the rescue of its successors.

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Accepted 19 March 1996

the greening of technology and models of innovation

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