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Free-market competition at the later stages of the RD&D chain, when technologies are
closer to commercialization, also plays an important role for continuous innovation.
Innovation is the implementation of a new or significantly improved product (good
or service) or process, a new marketing method, or a new organizational method in
business practices, workplace organization or external relations that reduces costs or
improves performance.
Research and development (R&D) comprises creative work undertaken on a
systematic basis to devise new products, processes and applications, and improve
existing ones. The term covers basic research, applied research and experimental
development (OECD 2002). Demonstration is a fundamental part of the development of
new technologies and can be defined as a project involving an innovation operated at or
near full scale in a realistic environment to aid policy or promote the use of innovation
(OECD 2002), and to show the viability of its application to manufacturers and
potential buyers.
The distinction between supply push and demand pull has traditionally
been important, especially, as they imply different technology policy
instruments—e.g., public R&D expenditures or incentives for private
R&D as classic technology ‘supply’ instruments versus government
purchase programmes, mandated quantitative portfolio standards,
regulated feed-in-tariffs, or subsidies as classic technology ‘demand’
policy instruments. Transformative technological change generally
requires the simultaneous leveraging of all innovation stages,
processes, and feedbacks, and thus a combination of both supply- and
demand-side technology policy instruments.
In an additional improvement over previous models, a market
formation stage has been added in explicit recognition of the so-
called ‘valley of death’ observed in this innovation process between
technology demonstration and diffusion. Many technologies fail at this
or a similar hurdle between development and demonstration if they are
too expensive, otherwise uncompetitive, too difficult to scale up, or lack
perceived market demand. Market formation activities support new
technologies that can struggle to compete with incumbent technologies
which enjoy economies of scale and the learning advantages resulting
from their more mature technology life cycle.
The importance of the institutional context in which innovation
occurs is also increasingly emphasized (Nelson 1993; Geels 2004). The
chain-linked model points to the need for a more systemic approach
to innovation, extending beyond the technology-focussed ‘hardware’
innovation process to also include analysis of actors, networks,
and institutions.
36 Low Carbon Development in China and India
closer to commercialization, also plays an important role for continuous innovation.
Innovation is the implementation of a new or significantly improved product (good
or service) or process, a new marketing method, or a new organizational method in
business practices, workplace organization or external relations that reduces costs or
improves performance.
Research and development (R&D) comprises creative work undertaken on a
systematic basis to devise new products, processes and applications, and improve
existing ones. The term covers basic research, applied research and experimental
development (OECD 2002). Demonstration is a fundamental part of the development of
new technologies and can be defined as a project involving an innovation operated at or
near full scale in a realistic environment to aid policy or promote the use of innovation
(OECD 2002), and to show the viability of its application to manufacturers and
potential buyers.
The distinction between supply push and demand pull has traditionally
been important, especially, as they imply different technology policy
instruments—e.g., public R&D expenditures or incentives for private
R&D as classic technology ‘supply’ instruments versus government
purchase programmes, mandated quantitative portfolio standards,
regulated feed-in-tariffs, or subsidies as classic technology ‘demand’
policy instruments. Transformative technological change generally
requires the simultaneous leveraging of all innovation stages,
processes, and feedbacks, and thus a combination of both supply- and
demand-side technology policy instruments.
In an additional improvement over previous models, a market
formation stage has been added in explicit recognition of the so-
called ‘valley of death’ observed in this innovation process between
technology demonstration and diffusion. Many technologies fail at this
or a similar hurdle between development and demonstration if they are
too expensive, otherwise uncompetitive, too difficult to scale up, or lack
perceived market demand. Market formation activities support new
technologies that can struggle to compete with incumbent technologies
which enjoy economies of scale and the learning advantages resulting
from their more mature technology life cycle.
The importance of the institutional context in which innovation
occurs is also increasingly emphasized (Nelson 1993; Geels 2004). The
chain-linked model points to the need for a more systemic approach
to innovation, extending beyond the technology-focussed ‘hardware’
innovation process to also include analysis of actors, networks,
and institutions.
36 Low Carbon Development in China and India
