sustainability Article Comparing the Technology Trajectories of Solar PV and Solar Water Heaters in China: Using a Patent Lens Yawei Wang 1, Frauke Urban 2, Yuan Zhou 1,* and Luyi Chen 1 1 School of Public Policy and Management, Tsinghua University, Beijing 100084, China; [email protected] (Y.W.); [email protected] (L.C.) 2 KTH Royal Institute of Technology, 10044 Stockholm, Sweden; [email protected] * Correspondence: [email protected]; Tel.: +86-138-0120-7051 Received: 10 October 2018; Accepted: 5 November 2018; Published: 12 November 2018 Abstract: China invests more in renewable energy than any other countries, such as in solar energy. The traditional literature maintains that these government-supported industries are more innovative than grassroots industries such as solar or thermal, which leads to debate. This study uses mixed methods, combining qualitative and quantitative approaches to compare the technology trajectories of leading solar water heater (SWH) and solar photovoltaic (PV) firms in China. It concentrates on the following three aspects: trajectories of key technologies, patent citation network, and type of collaboration. Our analyses show that technology trajectories differ significantly between leading SWH firms and PV firms in China. We find that the Chinese SWH firms are core to international knowledge networks, and are following a market-driven innovation mode. In contrast, Chinese PV firms are close to the center of the network and government-driven. Research suggests that grassroots innovation, by doing, using, and interaction (DUI), can create short-term market development models relying on China’s traditional industry model, but cannot create a long-term international leading innovation model; only integrated science, technology, innovation modes (STI), and DUI innovation modes tend to result in international leadership in innovation. Keywords: China; solar water heater; solar photovoltaic; technology trajectories; patent network 1. Introduction For achieving sustainable development, mitigating CO2 emissions requires the large-scale deployment of renewable resources technology, such as solar energy technology [1]. Global energy consumption has grown steadily in recent decades, putting a strain on fossil fuel resources and leading to environmental degradation and sustainability challenges [2]. China is the world’s largest energy user and the world’s largest emitter of CO2. At the same time, China belongs to the so-called Sun Belt countries [3], with total solar reserves of 1.47 × 107 billion kWh per year, which is equivalent to 2.4 trillion tons of standard coal [4]. Against this backdrop, as the two major industries in the field of solar energy, the solar water heater (SWH) and solar photovoltaic (PV) industries have developed rapidly in the last few decades in China. SWH is a mature technology, and China leads the world in the use of solar thermal power in domestic water heating. China’s PV power accumulative installed capacity increased from 70 MW in 2005 to 130.25 GW in 2017 [5]. China is also the largest solar PV manufacturer, but domestic installation lags behind [6]. Chinese solar PV is predominantly produced for the export market. It relies on intellectual property-intensive technologies and has gotten a lot of political and financial support from the provincial and central governments [7]. SWH depends mainly on Chinese technologies, such as evacuated tube technology, and can be found everywhere across China, especially in rural areas [7]. Sustainability 2018, 10, 4166; doi:10.3390/su10114166 www.mdpi.com/journal/sustainability Sustainability 2018, 10, 4166 2 of 29 Solar PV and SWH are both low-carbon technologies that contribute to China’s sustainable development. Yet, they have different technological, economic, and social characteristics and dynamics [7]. China is awakening to the need to fundamentally rethink the innovation pathways by which the two industries are developed and managed, for more effectively solving development bottlenecks, such as a lack of breakthrough innovations in the SWH industry and a lagging domestic market for the PV industry. This study uses mixed methods, combining qualitative and quantitative research approaches to compare the technology trajectories of leading solar water heater (SWH) and solar photovoltaic (PV) firms in China. This paper builds on previous research by Urban et al. [7] and uses patent analysis to examine the innovations of Chinese SWH and solar PV enterprises. Our main goal is to determine to what extent and how the PV and SWH patent knowledge bases differ in China. There is some literature on patent analysis for solar PV development in China [8], but less on SWH, and a knowledge gap exists regarding firm-level [9–11] technology pathways and innovation from a comparative-analysis perspective. According to Hu and Wang [12], 95% of SWH in China has the evacuated tube design. China Greentech Initiative (CGTI) estimates that Chinese firms hold 95% of the patents for core technologies of SWH worldwide [13]. However, academic research underpinning these figures is scarce. To observe the impact of technological innovation on enterprise expansion and market shares, and to provide empirical evidence for policy recommendations, this paper also explores the relationship between sales income and patent degree centrality through empirical analysis to observe the impact of technological innovation on enterprise expansion and market share. This study measures firms’ knowledge bases in three ways: the trajectories of primary technologies (measured by patents), patent citation networks (knowledge flow and spillover), and university-industry R&D collaboration and acquisition. Furthermore, this study discusses the possible drivers for the differences between Chinese SWH and PV industries’ technology development paths, such as industrial market orientation, innovation modes, and policy characteristics. Answering these questions can help us to understand how China can follow sustainable development pathways in the renewable energy industries. The research first reviews the literature on indigenous innovation in China. Section2 discusses the SWH and PV industries and their leading firms. Section3 discusses the methodology. Section4 presents the empirical analysis and case study. Section5 analyzes the influence of patent degree centrality on sales income. Section6 discusses the findings and presents the conclusions. 2. Literature Review China’s new indigenous innovation strategy aims to transform its business systems and leapfrog to a leading position in a science-based and technology-oriented industry [14]. The development of the solar energy industry has been supported by a series of investment and industrial policies in China, including the Medium-term to Long-term Plan (MLP). 2.1. SWH Development SWH represents one of the main applications of solar energy. The cumulated solar thermal capacity in the world by the end of 2017 was 472 GWth (the solar thermal energy of 106 square meters installed area is equal to 0.7 GWth, and 1 GWth = 109 W = 1,000,000,000 W), growing from 62 GWth in 2000 [10]. China has formulated standards for solar space-heating systems, which have supported its development [12]. China’s solar thermal heating accounted for about 80% of global production and 70.6% of global installed capacity in 2015 [15]. So China undoubtedly has the world’s largest SWH market. By the end of 2016, the vast majority of the total capacity in operation was installed in China (324.5 GWth), which was reported to save about 90.2 million tons of CO2 per annum [16]. With a global share of 71.6%, evacuated tube collectors were the predominant solar thermal collector technology in 2016 [16]. Sustainability 2018, 10, 4166 3 of 29 The SWH industry began with the development of China’s first solar water heaters at Tianjin University in 1958. In 1979, China began to attach importance to research on solar water heater technology, and broke through with the core evacuated tube technology in 1983. In 1986, Beijing Solar Energy Technology Co., Ltd. (Beijing, China) imported a copper-aluminum composite solar strip production line from the Canadian Shantap International Corporation, greatly improving the productivity and quality of solar water heaters [17]. A large number of solar water heater manufacturers emerged to commercialize the evacuated tube technology in the middle to late 1990s [18]. Over the years, clusters of big enterprises with an annual output of one million units of solar water heaters have formed in China, including Himin, Shandong Linuo, and Jiangsu Huayang. These enterprises have mastered the core technologies of water heaters and quickly expanded their market share by taking advantage of low costs. However, as Yin (the inventor of the multi-layer gradient aluminum-nitrogen/aluminum selective absorption coating all-glass evacuated solar collector tube) and Li pointed out in an interview [19], the low-tech threshold and low-cost market competition have stunted the solar water heater industry’s innovative potential, as technology shortages and products that lack innovation can hardly meet the increasingly complex needs of consumers. Many water-heater companies are realizing that technological innovation is the key to long-term market advantages. The existing literature emphasizes the significance of sectoral-level conditions that shape technology pathways, including market settings, factor conditions, and government policies. Some researchers have proved