Explaining the Slow Pace of Energy Technological Innovation: Why Market Conditions Matter?

27 Pages Posted: 3 Mar 2014

See all articles by Wei Jin

Wei Jin

School of Economics, University of New South Wales

ZhongXiang Zhang

Tianjin University - Ma Yinchu School of Economics

Date Written: March 3, 2014

Abstract

As a useful complement to numerous innovation policy studies from a normative perspective, this paper provides a positive framework to analyze the basic economic mechanism of energy technological innovation and explains its slow pace of technological progress. We find that the capital-intensiveness of energy technology is an inhibiting factor to catalyze market size effect and slows innovations and diffusions of energy technology in the market. We also show that the substantial homogeneity of energy products leads to both a monopolistic market structure on the supply side and a weak level of positive pecuniary externality on the demand side, both dampening the incentive of innovation. On the basis of our economic analysis, we recommend that a package of policy responses to accelerating energy innovation should include 1) downsizing “heavy” assets of energy technologies; 2) deregulating monopolistic energy-supplying markets; and 3) differentiating the homogenous energy products.

Keywords: The Economics of Technological Innovation, Market Size Effect, Love-for-variety effect, Energy Technology, IT Technology

JEL Classification: Q55, Q58, Q43, Q48, O31

Suggested Citation

Jin, Wei and Zhang, ZhongXiang, Explaining the Slow Pace of Energy Technological Innovation: Why Market Conditions Matter? (March 3, 2014). FEEM Working Paper No. 18.2014. Available at SSRN: https://ssrn.com/abstract=2403722 or http://dx.doi.org/10.2139/ssrn.2403722

Wei Jin

School of Economics, University of New South Wales ( email )

Kensington
High St
Sydney, NSW 2052
Australia

ZhongXiang Zhang (Contact Author)

Tianjin University - Ma Yinchu School of Economics ( email )

92 Weijin Road, Nankai District
Tianjin 300072
China
+86 22 87370560 (Phone)

HOME PAGE: http://ideas.repec.org/f/pzh243.html

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