Varieties of Innovation: The Creation of Wind and Solar Industries in China, Germany, and the United States

Thursday, 2 July 2015: 2:15 PM-3:45 PM
TW1.2.01 (Tower One)
Jonas Nahm, Brown University, Providence, RI
Where and how does innovation take place in contemporary high-technology sectors? Theories of innovation presume a division of labor between firms in industrialized economies that invent and commercialize new technologies and those in developing economies that focus on production. Even as global supply chains have allowed firms to outsource and offshore manufacturing activities, such literatures assume that innovation itself still takes place within firms in advanced economies. 

This paper develops a framework to understand innovation in high-technology industries through a comparative analysis of wind and solar sectors in China, Germany, and the United States. I argue that the rise of global production networks has altered the ways in which the range of engineering capabilities required for technological innovation are combined and established in high-technology sectors. First, in contrast to prevailing theories of innovation, I show that the fragmentation of production has distributed innovative capabilities across highly specialized firms in global supply chains, including  manufacturing firms in developing economies. Skills that were once organized within large firms are now coordinated in global networks in a process I call networked innovation. Second, new options for specialization have mitigated pressures for convergence in the types of skills required to advanced to the technological frontier. As a result, firms are able to incrementally build on existing strengths and industrial capabilities as they participate in networked innovation through specialized capabilities, often repurposing governmental resources and institutions established for prevailing industrial sectors in the process. In this context, sectoral industrial policies for emerging industries no longer fully determine variation in firm specialization, but divergent industrial legacies, firm practices, and governmental resources provided for the broader economy shape how firms participate in networked innovation. 

The paper draws on 224 executive interviews in wind and solar sectors and extensive analysis of archival documents and government yearbooks. In addition to contributing to theories on the political economy of innovation, this paper speaks to broader debates about the nature of economic development, industrial upgrading, and the role of sectoral industrial policy in shaping industrial capabilities under conditions of globalization.