The Case of Second Generation Biofuels in Norway
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UNIVERSITY OF OSLO FACULTY OF SOCIAL SCIENCES TIK Centre for technology, innovation and culture P.O. BOX 1108 Blindern N-0317 OSLO Norway http://www.tik.uio.no ESST The European Inter-University Association on Society, Science and Technology http://www.esst.uio.no The ESST MA How do firms promote stability in an evolving technological innovation system? - The case of second generation biofuels in Norway Line Elisabeth Blomberg University of Oslo/Globalization, Innovation and Policy 2008 Word count: 19 974 II Acknowledgements First of all, I would like to thank my supervisor Stian Nygaard for providing me excellent advices, fast feedback and support during the research and writing of this thesis. I would also like to express my gratitude towards Johannes Fjell Hojem at ZERO and Dr. Sjur Kaasa at CICERO for giving me valuable information and literature recommendations. Furthermore, as this thesis mainly is based on information gained during interviews, I would like to give a special thank to all the people who have provided me their valuable time, for nice conversations and for sharing crucial information with me. In addition, special thanks to my co-students Elisabeth, Erik, Einar and Jorun. Thank you for all the good conversations, discussions and last but not least all the laughs we have had during this year. Furthermore, I would also like to express my gratitude towards my family and friends who have supported me along the way, especially my father, sister Anne, Arnaud, Kari and Anita. Last but not least, a special thanks to Knut for your care and support during the writing of this thesis. III IV Abstract This thesis aims to increase the understanding of the formative phase of an evolving technological innovation system (TIS) related to second generation (2G) biofuels in Norway. Large uncertainties and high risks are associated with the development and introduction of new environmental technology. The confrontation between technological opportunities and the market takes place in an environment largely determined by actors, the relationship between them and institutions. The co-evolution of technology, market and institutions does not happen automatically, but is set in motion by strategic actions of firms, governments, research institutes and other organisations. In order to increase the understanding of the innovation process related to 2G biofuels, I have applied the analytical framework of technological innovation systems and some chosen literature from transition management. The concept of stabilisation mechanisms is used, and amongst them, three have been selected and analysed as having an impact on the formative phase of the evolving TIS. This study focuses on what kind of knowledge search strategies firms conduct in order to reduce technological uncertainties. Further, how political networks are organised and their influence on institutions and market formation is examined. Finally, I look into how demonstration projects influence development of technology and market formation in this early phase. Keywords: Second generation biofuels, technological innovation system, knowledge search, political networks, demonstration projects. V VI Table of Contents ACKNOWLEDGEMENTS ................................................................................................................................. III ABSTRACT .................................................................................................................................................... V TABLE OF CONTENTS .................................................................................................................................. VII LIST OF TABLES AND FIGURES ....................................................................................................................... IX ABBREVIATIONS ............................................................................................................................................X 1. INTRODUCTION ......................................................................................................................................... 1 1.1. EMPIRICAL CONTEXT .......................................................................................................................................... 2 1.2. THEORETICAL FOUNDATION ................................................................................................................................. 3 1.3. RESEARCH QUESTIONS ....................................................................................................................................... 3 1.4. THESIS OUTLINE ................................................................................................................................................ 4 2. BIOFUELS, TECHNOLOGY, ACTORS AND BARRIERS ...................................................................................... 5 2.1. “NO PROJECT IS AN ISLAND” ................................................................................................................................ 5 2.1.1. History .................................................................................................................................................. 5 2.1.2. Sustainability ........................................................................................................................................ 6 2.2. THE HOPE OF SECOND GENERATION BIOFUELS ......................................................................................................... 7 2.2.1. Explaining the technology .................................................................................................................... 8 2.3. THE NORWEGIAN SECOND GENERATION BIOFUELS INNOVATION SYSTEM (2BIS) .......................................................... 10 2.3.1. The value chain ................................................................................................................................... 10 2.3.2. Industry and firms .............................................................................................................................. 11 2.3.3. The government and authorities ........................................................................................................ 14 2.3.4. Universities and research institutes .................................................................................................... 14 2.3.5. NGOs, environmental and special interest organisations .................................................................. 15 2.4. BIOFUELS BARRIERS AND BLOCKING MECHANISMS.................................................................................................. 15 2.4.1. Bottlenecks related to technology and infrastructure ........................................................................ 16 2.4.2. Government policy and framework conditions .................................................................................. 16 2.4.3. Barriers related to demand and market formation ............................................................................ 18 3. ANALYTICAL FRAMEWORK ....................................................................................................................... 19 3.1. THE CONCEPT OF INNOVATION ........................................................................................................................... 19 3.1.1. Linear model of innovation ................................................................................................................. 20 3.1.2. Interactive model of innovation ......................................................................................................... 21 3.2. THE CONCEPT OF INNOVATION SYSTEMS .............................................................................................................. 22 3.2.1. Main activities and structural elements ............................................................................................. 22 3.2.2. Evolutionary economics and economic development ......................................................................... 23 3.2.3. Different approaches to innovation systems ...................................................................................... 24 3.3. THE EVOLUTION OF A TECHNOLOGICAL INNOVATION SYSTEM .................................................................................. 25 3.3.1. The roles of various actors .................................................................................................................. 25 3.3.2. The role of networks ........................................................................................................................... 27 3.3.3. Institutions .......................................................................................................................................... 29 3.3.4. The formative phase of an evolving TIS .............................................................................................. 30 3.3.5. Activities and functions in a TIS .......................................................................................................... 31 3.3.6. The concept of stabilisation mechanisms ........................................................................................... 33 3.3.7. The chosen stabilisation mechanisms ................................................................................................ 34 4. RESEARCH DESIGN AND METHODS .........................................................................................................