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Linking Energy Efficiency and Innovation Practices Empirical Linking energy efficiency and innovation practices: Empirical evidence from the foundry sector Enrico Cagno a,n, Andres Ramirez-Portilla a,b, Andrea Trianni a a Politecnico di Milano, Department of Management, Economics and Industrial Engineering, Piazza Leonardo da Vinci 32, 20133 Milan, Italy b KTH Royal Institute of Technology, Department of Industrial Economics and Management, Lindstedsvägen 30, 10044 Stockholm, Sweden Received 29 June 2014 Received in revised form 4 February 2015 Accepted 24 February 2015 Available online 5 March 2015 1. Introduction According to the European Council for an Energy Efficient Abbreviations: AE, association expert; BEE, barrier to energy efficiency; BEE-H, Economy, since the 1970s, energy efficiency has contributed more high level of barriers to energy efficiency; BEE-L, low level of barriers to energy to European economic prosperity than any other single source of efficiency; BAT, best available technology; BAT-H, high level of adoption of best energy supply (ECEEE, 2014). This fact indicates that proper po- available technologies; BAT-L, low level of adoption of best available technologies; EEI, energy efficiency indicator; EM, energy manager; INB, inbound Open Innova- licies focusing on energy sustainability and energy efficiency tar- tion; IP, intellectual property; IRD, internal R&D; OI, Open Innovation; OUT, out- gets are of vital importance for society, governments, and industry. bound Open Innovation; SEC, specific energy consumption; SEC-H, high level of Conversely, industry involvement is a keystone to achieving these performance in specific energy consumption i.e. more energy efficient; SEC-L, low fi level of performance in specific energy consumption i.e. less energy efficient; SME, targets because it is responsible for a considerable share of the nal small- and medium-sized enterprise energy consumption in society. For instance, in the EU alone, n Corresponding author. industry accounts for 26% of the final energy consumption (Eur- E-mail addresses: [email protected] (E. Cagno), opean Commission, 2013a). Nevertheless, industry involvement is [email protected] (A. Ramirez-Portilla), [email protected] (A. Trianni). often inhibited by the existence of market failures and barriers that drive the intervention of public policies and initiatives (Brown, of combining different innovation practices on foundries' effi- 2001). Therefore, it seems that to encourage better en-gagement of ciency levels as measured by the three EEIs. In particular, each the industrial sector towards achieving higher energy efficiency, it indicator allowed us to examine the effect between different levels is necessary to promote additional initiatives that help decrease of adoption of innovation activities and (i) a common and objec- these barriers but, at the same time, drive compe-titiveness and tive measure of energy efficiency, i.e., SEC; (ii) the viewpoint of growth in firms. One possible option could be fo-cusing on technology adoption as a direct enabler of energy efficiency, i.e., innovation, first, because promoting innovation and R&D rather BATs; and (iii) considering perceived obstacles on the decision- than energy efficiency per se is likely to be an especially effective making process acting on energy efficiency, i.e., BEEs. Moreover, we way of improving efficiency (Reddy, 1991), and second, because examined the relationship between the three EEIs to provide innovation is an initiative that, together with energy-re-lated further evidence of innovation practices as an enabler of energy efforts, has been notably included in the agendas of firms and efficiency. governments in the last decade. The rest of the paper is organised as follows. Section 2 reviews A clear example is the Europe 2020 strategy (European Com- major literature on the concepts and measurement of Open In- mission, 2010), a central guideline for European Union growth in novation and industrial energy efficiency, together with a sug- which two of the key targets translate into flagship initiatives such gestion of their link and the study framework. Section 3 explains as promoting R&D and energy efficiency (European Commission, the research method. Section 4 shows and discusses the main 2013b). Despite this type of policy helping firms to realise the need results of our analysis. Section 5 provides conclusions of this study for both, driving profitable growth through innovation and being with potential policy implications, limitations, and opportunities environmentally sustainable (Smith et al., 2010), there has been for future research. little discussion about understanding the impact of innovation practices on energy efficiency. Addressing this gap is of paramount importance because traditional literature has overlooked the op- 2. Combining innovation and energy efficiency portunity to use interdisciplinary approaches to propose how to foster more innovative and energy-efficient firms. Even more, this Historically, people have used innovation as a way to increase is particularly relevant for firms operating in energy-intensive efficiency in energy-related applications, with several well-known sectors with moderate level of innovation, such as foundries, where examples in the industrial sector (see, e.g., Geels, 2002). These energy efficiency is strictly related to industrial and com-pany events indicate that continuous innovation, R&D, the development performance. of new technologies, and other types of innovation practices could Thus, to empirically explore the link between innovation have a direct effect on energy efficiency and industrial perfor- practices and energy efficiency, we borrow the idea of Open In- mance. Although literature combining innovation practices and novation (Chesbrough, 2003) to measure the innovativeness of a energy efficiency is scarce, a few previous studies have provided firm in terms of its innovation practices, rather than focusing on some initial indications for understanding the relationship be- product, process, or service innovation. Open Innovation (OI) is a tween these two concepts. model for managing innovation based on leveraging the firm's R&D One of these first studies was from Lutzenhiser (1994), who through the purposive inflows and outflows of knowledge to investigated industrial energy efficiency with a model derived from accelerate internal innovation (the inbound process) and to ex- social sciences literature on technology and organisational change. pand the markets for external use of innovation (the outbound This model proposed the role of organisational networks in shaping process) (Chesbrough et al., 2006). One advantage of this model is and constraining innovation, and the topic was studied using data encompassing, connecting and integrating of internal R&D with on barriers to energy efficiency in the US industry. Another other existing innovation activities and previous innovation the- interesting study revealing energy efficiency as an out-come of ories (Huizingh, 2011). In addition, evidence shows that OI can help using a different innovation perspective was conducted by organisations, including small- and medium-sized en-terprises Christensen et al. (2005). Although the main purpose of their study (SMEs), innovate, even with limited resources and mar-ket reach was investigating the industrial dynamics of OI, their ana-lysis (Brunswicker and Ehrenmann, 2013; Van de Vrande et al., 2009; provided some hints about the connection between industrial Xiaobao et al., 2013). We then explore a possible link between innovation and energy efficiency. More specifically, his in-depth innovation practices and energy efficiency under the premise that case study revealed that in the consumer electronics innovation because OI can support the introduction of new technologies to a system, open and collaborative innovation was needed to achieve firm (West and Bogers, 2013), it could also support the addition of better energy efficiency performance in audio amplifiers, which the best energy-efficient technologies. Consequently, this paper later created a new technological regime. explores whether the combination of internal R&D with Open Following the Open Innovation research trend observed in the Innovation practices is beneficial to firms in terms of energy last decade, Hakkim and Heidrick (2008) used the OI model to efficiency, measured by three different indicators. explore the energy sector in Canada. Although this study was To accomplish this task, being this a first and exploratory at- useful for advancing the role of OI in the energy sector, it did not tempt, a multiple case study was conducted with 30 foundries provide insights about the relationship between innovation prac- located in Northern Italy producing four different types of alloys: tices and energy efficiency performance. To the best of our aluminium, steel, grey cast iron and ductile cast iron. Through a knowledge, the only recent study that has proposed to understand self-reported questionnaire, we estimated six main indicators. On the role of innovation in energy efficiency was done by Trianni et one side, we evaluated the firms' innovation level through the al. (2013b). This study examined how some innovation factors may adoption of practices related to internal R&D (IRD), inbound Open affect the adoption of energy-efficient technologies in energy- Innovation (INB), and outbound Open Innovation (OUT). On the intensive industries based on the barriers affecting the adoption of other side, we measured three different but related energy effi- such technologies.
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