In an era of global supply chains and rapid technological change, what is the role of the state in encouraging innovation and firm growth in new industries? My book examines renewable energy sectors in China, Germany, and the United States as a window into state-firm relations in this context. Governments have taken similar industrial policy approaches to encourage the creation of domestic wind and solar sectors. Yet, China, Germany, and the United States each have developed distinctive constellations of firms with starkly different technical capabilities. Drawing on two years of field research, including over 200 firm-level interviews, Varieties of Innovation shows how firms respond to renewable energy policy by incrementally building on domestic industrial legacies, even in emerging industries such as wind and solar. The birth of new industries is often understood as a point of discontinuity in patterns of industrial development. By contrast, the book shows how firms reproduce national industrial and economic ecosystems and forge durable national political economies over time, at times in defiance of state industrial policy objectives. The core empirical contribution of the book concerns the emergence of distinct Varieties of Innovation in wind and solar industries in response to the policies of the state in each of the three economies.
Wind and solar sectors are particularly compelling industries for this investigation. First, renewable energy industries exemplify the aspiration of governments around the world to cultivate domestic high-technology industries through targeted state intervention. Second, the focus on wind and solar sectors, barely two decades old, offers insights into technological innovation in new industries established post-globalization. Finally, wind and solar sectors are based on technologies with divergent production requirements, supply chain structures, and requisite capabilities. If firms in a particular locale specialize in similar activities in both sectors, industrial specialization must be the result of factors other than the technology itself.
State policy for wind and solar industries has sought to create renewable energy sectors wholly within national boundaries. I find that industrial policy is rarely able to realize such aspirations. Engineering tasks that were once organized within large enterprises are now distributed across specialized firms in global supply chains, including manufacturers in developing economies. Firms no longer have to establish the full range of skills required to bring an idea from lab to market, but can specialize and collaborate with others. In this context, firms respond to renewable energy policy by augmenting existing industrial capabilities and repurposing familiar institutions within the broader economy, often in ways unanticipated by the state. In Germany, most renewable energy firms have harnessed the legacy of the machine tool sector to specialize in the development of complex components and production equipment. In China, wind and solar firms have repurposed local government support for the mass production economy to establish advanced R&D capabilities focused on commercialization. Finally, in the United States, startups with skills in the invention of new technologies have adapted institutions for technology transfer from research institutes to the private sector, but have rarely established capabilities in commercialization and production. The final chapter shows that the ability of firms to maintain such distinct “varieties of innovation” hinges on their ability to collaborate with global partners to access capabilities they do not have.
The book has important implications for both public policy and theories of state-firm relations. First, it shows that globalization has widened the space for cross-national diversity in industrial specialization and documents the role of industrial legacies in shaping how firms insert themselves into global green industries. Governments around the world support renewable energy innovation not just for environmental reasons, but also in the hopes of creating tangible economic rewards to garner political support. In this context, this project points to the limits of industrial policy and explains who benefits and how. Second, the book shows that even when governments pursue similar policy goals, firms are active agents in maintaining distinct national patterns of industrial specialization. These findings challenge literatures that ascribe diversity in national capitalisms primarily to the ability of the state to protect distinct national practices, and shed new light on the role of firms in the renewal of legacy institutions. Finally, the book identifies a new and critical role for developing-economy firms in the development of the green energy technologies that are central to solving global environmental problems.