Accelerating Energy Innovation Insights from Multiple Sectors
edited by Rebecca M. Henderson and Richard G. Newell
University of Chicago Press, 2011
Cloth: 978-0-226-32683-2 | Electronic: 978-0-226-32685-6
DOI: 10.7208/chicago/9780226326856.001.0001


Accelerating energy innovation could be an important part of an effective response to the threat of climate change. Written by a stellar group of experts in the field, this book complements existing research on the subject with an exploration of the role that public and private policy have played in enabling—and sustaining—swift innovation in a variety of industries, from agriculture and the life sciences to information technology. Chapters highlight the factors that have determined the impact of past policies, and suggest that effectively managed federal funding, strategies to increase customer demand, and the enabling of aggressive competition from new firms are important ingredients for policies that affect innovative activity.


Rebecca M. Henderson is the Senator John Heinz Professor of Environmental Management at Harvard Business School and a research associate of the NBER. Richard G. Newell is Administrator of the US Energy Information Administration, on leave from both the NBER and Duke University, where he is the Gendell Associate Professor of Energy and Environmental Economics.



- Rebecca M. Henderson, Richard G. Newell
DOI: 10.7208/chicago/9780226326856.003.0001
[energy systems, carbon dioxide emissions, innovation, technology]
Reorienting current energy systems toward a far greater reliance on technologies with low or no carbon dioxide emissions is an immense challenge. This book explores how the U.S. energy innovation system could be improved using a complementary approach. Instead of focusing on the history of the energy industry to draw lessons for the future of energy innovation, it outlines the history of innovation in several industries that have already seen extraordinary rates of technological progress: agriculture, chemicals, semiconductors, computers, the Internet, and biopharmaceuticals. The chapters examine the complex role that public policy and private markets have played in triggering rapid innovation in the industry and in sustaining it once in motion. In four of the industries discussed in the book—agriculture, semiconductors, computers, and the Internet—the federal government played an important role in funding deployment of the new technology. The book suggests that greatly increasing rates of energy innovation requires creating significant demand for low-carbon technologies, substantially increased federal funding for well-managed research, and support for the initial deployment of new technologies. (pages 1 - 24)
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- Richard G. Newell
DOI: 10.7208/chicago/9780226326856.003.0002
[innovation system, research and development, policy making, energy systems, technology]
This chapter reviews the record of innovation in energy technology. Innovation policy has been most efficient in the energy arena when it has complemented rather than attempted to directly substitute for market demand. By eliciting technological innovation through policies and regulations, governments in the developed world have been quite effective. Very substantial improvements in efficiency and environmental performance have been achieved across a wide array of energy production and end-use technologies in response to various standards and other requirements. A number of studies over the past several years have also evaluated the performance of federal energy research and development (R&D) programs. The scale of the climate technology problem and other energy challenges suggests a solution that maximizes the impact of the scarce resources available for addressing these and other critical societal goals. Evidences indicate that an emissions price and R&D approach could provide the basic framework for such a solution. The energy sector is vast and highly complex, but the chapter nonetheless sketches out some “central tendencies” that provide important background. (pages 25 - 48)
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- Tiffany Shih, Brian Wright
DOI: 10.7208/chicago/9780226326856.003.0003
[agriculture, public investment, private investment, innovative policies, technological advances, government]
This chapter provides an overview of innovative policies for agriculture, with the purpose of highlighting aspects of interest to the energy sector. It also presents a summary of global agricultural research investments, with particular attention to public versus private investments and their distribution between developed and less-developed countries. The chapter furthermore outlines the history of U.S. public investment in agriculture. It raises a number of important issues around the role of intellectual property rights and public or private partnership in framing innovation. The importance of government regulation and its dual responsibilities of ensuring public safety and promoting technological advances are also described. The chapter concludes with a discussion on the factors influencing technological adoption in agriculture. (pages 49 - 86)
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- Ashish Arora, Alfonso Gambardella
DOI: 10.7208/chicago/9780226326856.003.0004
[chemical industries, innovation, research and development, engineering firms, government programs]
This chapter explores the sources of innovation in the chemical industry, an industry that resembles some aspects of the energy sector in the chemical industry's focus on process development, and whose early development was significantly more global than those of the others. It describes the switch in coal-based raw materials to those derived from oil and gas, and briefly analyzes two government programs—synthetic rubber and synfuels—that have attempted to promote innovation. In the case of chemical innovation, energy innovation is more likely to be successful and effective when private research and development (R&D) from diverse sources is stimulated and strong patents protection is combined with robust antitrust enforcement. The chapter discusses the specialized engineering firms that have played an important role in the diffusion of important innovations and the effects that government policies have had on fostering innovation. (pages 87 - 112)
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- Iain M. Cockburn, Scott Stern, Jack Zausner
DOI: 10.7208/chicago/9780226326856.003.0005
[life sciences, innovation, policy choices, scientific discoveries, climate change]
This chapter reviews the roots of innovation in life sciences, an industry that has been the second-largest recipient of federal research funding (after defense), and which is justly celebrated for the extraordinary productivity of the “innovation ecosystem” that links its public and private sectors. The nature of energy and climate change innovation is in many respects different in some fundamental ways from life sciences innovation; however, the evolution and structure of the life sciences innovation system offers an instructive comparison. The genesis and evolution of the life sciences innovation system is the consequence of a set of policy choices and a microeconomic environment that has allowed the United States to leverage a set of embryonic scientific discoveries into a platform for sustained innovation, which has had a significant impact on human health and welfare. Some key features of the life sciences innovation system, such as the set of interdependent firms, markets, institutions, and regulatory and legal frameworks responsible for this strong record of innovation, and some lessons from this sector for innovation policy in energy and climate change, are outlined in the chapter. (pages 113 - 158)
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- David C. Mowery
DOI: 10.7208/chicago/9780226326856.003.0006
[semiconductor, computer hardware, computer software, federal policy, research and development]
This chapter reviews the technological and industrial development within semiconductors, computer hardware, and computer software. It also highlights the important and constructive role played by federal policy. The striking characteristic of federal policy was the fact that it extended beyond the “conventional” technology policy tool of research and development (R&D) spending to include military procurement, intellectual property rights, and antitrust policies. Although these various dimensions were not coordinated or formulated with any coherent strategy in mind, they had the effect of supporting both the “supply” of knowledge, know-how, trained personnel, and the “demand” for adoption of the technologies emerging from the R&D process. The chapter furthermore shows how the federal R&D and other policies were of great importance to the development of economically vibrant semiconductor and computer hardware and software industries. (pages 159 - 188)
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- Shane Greenstein
DOI: 10.7208/chicago/9780226326856.003.0007
[Internet, innovation, economy, information technology, regulatory policies]
This chapter discusses the institutional roots of the innovations that led to the development of the Internet. Given the centrality of information technology and telecommunications to the modern economy, it is particularly intriguing to be reminded of the critically important role that the federal government played in the development of both sectors—and to be exposed to careful discussions of the institutional structures and strategic decisions that made public support so very powerful in both industries. The chapter explores how the use of Internet throughout the 1990s touched a wide breadth of economic activities. The diffusion transformed the use of information technology throughout the economy and led to improvements in products, lower prices, the development of new capabilities, and the development of many innovations that enabled productivity improvements among business users. It diffused to the majority of homes and businesses, altering the way people shop, research, play, and relate socially. The chapter divides the Internet's development into a precommercial and commercial era. These two eras illustrate two distinct models for accumulating innovations over the long haul. The chapter also outlines a few conditions necessary to unleash value creation from such accumulated lessons, such as standards development and competition, and nurturing legal and regulatory policies. (pages 189 - 224)
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- Josh Lerner
DOI: 10.7208/chicago/9780226326856.003.0008
[venture market, venture capital, entrepreneurial innovation, government programs, energy]
This chapter records that, despite the fact that venture capital investments are a relatively small share of total research and development (R&D) investment, they are exceedingly effective. However, it is noted that while public policy can help to maintain a healthy level of venture capital investment, direct government investment in venture capital funding can exacerbate the boom and bust cycles characteristic of the industry. The chapter discusses the implications of the difficulties in the venture market for innovation with a particular emphasis on alternative energy. Venture capital funding has an important role to play in stimulating innovation and economic growth. But venture funding has a tendency to be cyclical, and this tends to reduce the private and social returns to these innovations. These dynamics have important implications for thinking both about the probable effectiveness of private-sector investments in energy and whether and how the government should play a role. The chapter discusses the cyclicality in the venture capital industry. While government programs aimed at spurring venture capital and entrepreneurial innovation in alternative energy strive to produce a positive social rate of return, there are many challenges. The most effective programs and policies seem to be those which lay the foundations for effective private investment. (pages 225 - 260)
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Author Index

Subject Index