Escaping Path-Dependence: Essays on Foresight and Environmental Management

Transcription

1 Escaping Path-Dependence: Essays on Foresight and Environmental Management Totti Könnölä Licentiate Thesis May 31, 2005 Helsinki University of Technology Department of Engineering and Physics and Mathematics Systems Analysis Laboratory

2 Foreword I am especially grateful to my supervisor Prof. Ahti Salo for the active guidance and collaboration during this study. Furthermore, I have been fortunate to work together with the encouraging and highly proficient co-writers Dr. Javier Carrillo-Hermosilla, Dr. Mari Hjelt and Dr. Gregogy Unruh. Also grateful to the other colleagues and the anonymous referees for the valuable comments and support, I am looking forward to continuing scientific debate on these issues. For the financial support, I address my gratitude to the Research Foundation of Helsinki University of Technology, the Foundation of the Instituto de Empresa and Helsinki Institute of Science and Technology Studies. This learning process has offered me many opportunities to explore and walk new paths both in professional and personal arenas. This would not have been possible without the understanding and encouragement of you; Äiti, Isä, Mitti, Vaari and Lauraseni. Olen erityisen kiitollinen ohjaajalleni professori Ahti Salolle tämän tutkimuksen aktiivisesta ohjauksesta ja hedelmällisestä yhteistyöstä. Lisäksi, olen onnekseni saanut työskennellä ja kirjoittaa yhdessä rohkaisevien ja erityisen pätevien tohtorien Javier Carrillo-Hermosillan, Mari Hjeltin ja Gregory Unruh n kanssa. Kiitollisena myös muille kolleegoilleni ja anonyymeille artikkelien arvioijille arvokkaista kommenteista ja kannustuksesta, toivon voivani jatkossakin osallistua tieteelliseen keskusteluun näistä asioista. Taloudellisesta tuesta kiitokseni kuuluu Teknillisen korkeakoulun ja Instituto de Empresan tiedesäätiöille ja HIST:lle (Helsinki Institute of Science and Technology Studies). Tämä oppimisprosessi on tarjonnut minulle useita mahdollisuuksi etsiä ja kulkea uusia polkuja niin ammatillisten haasteiden kuin yksityiselämän parissa, mikä ei olisi ollut mahdollista ilman ymmärrystä ja kannustustusta, jota olen saanut teiltä, Äiti, Isä, Mitti, Vaari ja Lauraseni. Espoo, May 31, 2005 Totti Könnölä 2

3 Licentiate Thesis Helsinki University of Technology Department of Engineering and Physics and Mathematics Systems Analysis Laboratory Escaping Path-Dependence: Essays on Foresight and Environmental Management Author: Supervising professor: Totti Könnölä Professor Ahti Salo, Helsinki University of Technology Publications The licentiate thesis consists of the present summary article and the following papers: 1. Salo, A., Könnölä, T. and Hjelt, M. (2004). Responsiveness in Foresight Management: Reflections from the Finnish Food and Drink Industry, International Journal of Foresight and Innovation Policy, Vol. 1., Nos. 1-2, 2004, pp Könnölä, T., Unruh, G.C. and Carrillo-Hermosilla, J. (to appear). Prospective Voluntary Agreements for Escaping Carbon Lock-in. Journal of Ecological Economics. 3. Könnölä, T. & Unruh, G.C. (to appear). Really Changing the Course: Limitations of Environmental Management Systems for Innovation. Journal of Business Strategy and the Environment. Contributions of the author The three papers were initiated by Könnölä, who was the primary author of papers (2) and (3). Paper (1) is based on the project in which Könnölä worked as an expert and participated in the process management together with the other authors. Writing the paper was a collaborative effort initiated by Könnölä. He contributed to the development of the approach and wrote the first drafts that were commented and further elaborated on by Salo and Hjelt. In paper (2), Könnölä identified linkages between different research areas and elaborated a new policy tool responding to the challenges identified within the conceptual framework that was originally developed by Unruh. Unruh and Carrillo-Hermosilla commented and participated in the elaboration of the paper towards the journal submission. Paper (3) was initiated by Könnölä, who extended and elaborated the theoretical framework developed by Unruh and applied the approach to the analyses of an empirical phenomenon. Drafting the final version of the paper was a creative joint effort. 3

4 1 Introduction In recent years, national, regional and sectoral foresight exercises have been conducted in many countries, in order to define research priorities, improve networking and build common visions within the innovation system (Salo and Cuhls, 2003). The locus of foresight activities has tended to shift from positivist and rationalist technology-focused approaches towards the recognition of broader concerns that encompass the entire innovation system, including its societal dimensions and diverse stakeholder perspectives. The High Level Expert Group appointed by the European Commission crystallized these trends by defining foresight as follows (European Commission, 2002): A systematic, participatory, future intelligence gathering and medium-to-long-term visionbuilding process aimed at present-day decisions and mobilising joint action. While the expansion of foresight scope may cause digression and ambiguity, it also provides opportunities for learning and synchronized action among different policy fields. Thereat, the first objective of this study is to examine linkages between foresight and environmental management in order to improve the understanding of broader role of foresight activities in society. This type of bridge-building leads to the second objective of this study which is to elaborate an inter-disciplinary but still congruent theoretical and methodological approach to the management of foresight activities that foster environmentally sound technological change. Section 2 positions the study in the literature within the chosen theoretical groundings. Section 3 deals with the methodology of the study, and section 4 describes the results, which are discussed in Section 5. 2 Theoretical Framework The management of foresight activities borrows from a large range of different disciplines such as evolutionary economics and technological change theories, systems analysis and operations research, sociology and political sciences, actor-network and communication theories, organizational change and knowledge management, among others. For this study, the tradition of evolutionary economics and technological change (Dosi et al., 1988) provides the overarching framework that (i) acknowledges technology as an endogenous phenomenon within the economy and (ii) characterizes the technology as knowledge, which creation and exploitation is highly dependent on available resources such as capabilities and time. Here, the understanding of the historical accumulation of resources and their inter-related dynamics provides bases for understanding of the co-evolution of technological and institutional systems. 4

5 Such evolutionary dynamics can be examined in different levels of innovation systems, including organizational, sectoral, national or international dimensions. This helps improve the understanding of the multiple dimensions of barriers and drivers for change and, therefore, has a particular value for the management of foresight activities that engage stakeholders from all levels of innovation systems. In keeping with evolutionary theorizing, foresight activities can be considered as a conduct of action research (e.g. Argyris et al. 1985); research orientation improves the understanding of the innovation system, and action enhances its performance. Within these premises, paper (1) focuses on the management of foresight activities with emphasis on fostering learning and creativity in the innovation system. Respectively, papers (2) and (3) focus on the improved understanding of the dynamics of the innovation system in which foresight activities are conducted. 3 Methodology The methodology of this study builds on the action research paradigm. It subsumes a variety of methodologies such as Checkland s soft systems analysis (Checkland, 1981) and Argyris action science (Argyris et al., 1985), which are inherently cyclic, participatory, qualitative and reflective. In particular, paper (1) builds on the case study in which the authors were coordinators of a foresight exercise, thus able to conduct action research. The authors elaborated iteratively the management approach while they conducted the exercise. One of the strengths of the foresight exercise is the combined use of different methods, parallel to triangulation (Singleton and Straits, 1999) in the search for valid results. The methods used in different phases of this study include literature reviews, queries, semi-structured interviews, scenario building and computer assisted workshop methods. Case studies are suitable for describing new phenomena, but are subject to interpretation biases and contingency factors not present or transparent in the case descriptions. Consequently, papers (2) and (3) can be characterized as empirically based theory building, in which emphases are laid on the elaboration of the congruent interdisciplinary theoretical framework based on the literature review and authors experience on foresight and environmental management. The theoretical frameworks are attested by empirical proofs documented in empirically grounded materials of the examined phenomena. 5

6 4 Results Paper (1) is based on experiences from participatory foresight exercises and a recent foresight study for the Finnish food and drink industries. The authors elaborate three general objectives for foresight activities, which include (i) improved systems understanding, (ii) enhanced networking and (iii) strengthened innovation activities. It is also argued that foresight is an inherently creative activity and adoption of rigorous methodologies may include risks in that the initial questions may turn out to be of lesser relevance as the foresight process progresses. Here, the authors identified responsiveness as a relevant design variable in the management of foresight activities. It requires receptivity vis-à-vis the interests and expectations of participating stakeholders and flexibility in planning and implementation. This, in turn, has implications for decision-making structures and methodological choices. Some of these implications are examined by describing a foresight study for the Finnish food and drink industries. The authors posit also that in more general terms the management of systemic instruments (Smits and Kuhlmann, 2003) should be able to react to changing requirements, much in the same way as a responsive foresight process. This suggests that responsiveness which is examined in relation to foresight only is relevant also to the management of other instruments of innovation policy. In paper (2), the authors look for evolutionary policy responses to techno-institutional lock-in - a persistent state that creates systemic market and policy barriers to technological alternatives (Unruh 2000, 2002). The coordination role for authorities rather than corrective optimization is addressed (Metcalfe, 1995) and three evolutionary policy objectives are elaborated, including the fostering of (i) diverse technological options, (ii) common vision for the implementation of technological alternatives and (iii) changes in social and physical networks. The authors use these objectives to analyze documented experiences from environmental voluntary agreements and foresight activities. It is argued that combining the virtues of these tools into a new policy tool, named prospective voluntary agreement help facilitate an escape from techno-institutional lock-in. The merit of prospective voluntary agreement lies with the enhancement of collaborative policy culture and inter-sectoral and interdisciplinary stakeholder learning that creates commitment to desired action for escaping lock-in. In paper (3), the authors broaden the scope of Environmental Management Systems (EMS) research by describing how EMS can contribute to inertia in present production systems and can inhibit dramatic shifts toward more sustainable technologies and systems. The approach builds upon 6

7 technological lock-in theory, which focuses on market coordination and technological interdependencies (David, 1989; Arthur, 1994). Building on this framework, the authors emphasized previously under appreciated non-market social forces and institutional structures that can reinforce lock-in. It was posited that the co-evolutionary mechanisms that generate increasing returns for physical technologies may also be applied to social technologies, such as management systems. The paper describes the emergence of EMS lock-in as a path-dependent evolution occurring within the context of the larger quality management paradigm. While EMS may produce improvements in environmental performance, EMS may also constrain organizational focus to the exploitation of present production systems, rather than exploring discontinuous innovations (Tushman & O Reilly, 1997). The paper questions the exuberant private and public sector support for EMS implementation and instead recommends an ambidextrous management approach which integrates foresight and broader stakeholder collaboration. 4.1 Path-Dependence and Evolutionary Policy-Making Papers (2) and (3) elaborate the policy approach addressing path-dependencies, in which the main question is not optimization and equilibrium, but endogenous technological change within longterm co-evolution of environmental, social and economic processes and complex systems characterized by irreversibility and uncertainty (Mulder & Van den Bergh, 2001; Frenken et al., 2004). Technological change is subject to barriers driven especially by increasing returns to scale that can limit the diffusion of superior technologies (David, 1989; Arthur, 1994). The combination of costly, durable technologies and legally codified social management systems creates intense conditions of path-dependence. Such conditions occur particularly on the scale of nations, but similar processes also are at work on lower levels of the innovation system, within industries and even within individual companies themselves. In this context, Papers (2) and (3) examined negative implications of path-dependence in relation to environmental technologies and environmental management systems. In particular, paper (2) identifies possible emerging limitations of organizational focus on (i) the optimization of present production systems, (ii) routinization and conformity and (iii) extrapolation of future. Because path-dependencies emerge in all levels of innovation systems, it is suggested that they are prone to appear even in the management of policy tools particularly designed to challenge such dynamics, also in foresight activities and other systemic instruments. Here, precautionary and responsive actions that allow evolution within the management of policy tools, and respective policy actions, are needed. Thus, the management of foresight activities should be more concerned 7

8 with facilitating technological and structural changes than imposing a particular result. Foresight activities facilitated by authorities should aim at the improved understanding of the whole innovation system and foster the diversity of competing technologies and related coalitions with their widely different architectures, configurations, features and standards. 4.2 Foresight Management in Light of Path-Dependence Paper (1) identifies general foresight objectives that are present in recent national, regional and sectoral foresight exercises including vision building, priority-setting and networking. Here, pathdependencies examined in papers (2) and (3) have several implications on these objectives, summarized as follows:. 1. Common vision-building of the future and its technologies reduces uncertainties and helps synchronizing the strategies of different stakeholders leading into joint action. However, excessive search for consensus on the most probable future and its technologies may lead to conservative and abstract results strengthening existing path-dependencies. General abstractions are also difficult to deliver into action, especially in the absence of identified responsibilities and policy measures (Salmenkaita and Salo, 2004). Thus, the search for a consensual future vision should be complemented (or even replaced) with the exploration of possible alternative futures and respective alternative technological arrangements. 2. Priority-setting may become excessive if it diminishes the diversity of options in a way that reduces the diversity vital for the adaptive flexibility and evolutionary potential of the innovation system (Mulder & Van den Bergh, 2001). Thus, it is pertinent that foresight activities focus on the improvement of systemic understanding among different stakeholders on techno-institutional dynamics and the fostering of diversity of competing technological options and value networks. 3. Networking develops connectivity and efficiency within the innovation system (Barré, 2002). However, too strong networks may create path-dependencies that inhibit relevant improvements within the innovation system. Thus, networking should search for a balance between the strengthening of existing networks considered valuable and the creative destruction of networks considered too strong. 8

9 In particular, responsiveness in the management of foresight activities the methodological approach developed in paper (1) provides conceptual and managerial support to encompass the implications of path-dependence. Responsiveness challenges the management and the participants in continuous learning and in the search for creativity in the process, thus it helps escape pathdependencies driven by organizational practices such as excessive emphases on the optimization of present production systems, extrapolation of the future or rutinization and conformity. Paper (1) identified various concerns on responsive management that called for clear definition of the decision-making bodies and their specific roles. Correspondingly in paper (2), the linkage between foresight and decision-making for escaping path-dependence was elaborated with the development of the new concept of prospective voluntary agreement that combines the virtues of foresight and environmental voluntary agreements to foster environmentally sound technological change. 5 Discussion The findings on the different dimensions of path-dependence in the innovation system and respective implications to foresight and environmental management open up also a wider discussion on the role of interdisciplinary and sectoral policy processes and their research. During the past few decades, we have witnessed the rapid expansion of knowledge production and distribution and great variety of respective societal responses. For example, some scientific disciplines (in particular life sciences and environmental sciences) stress inter-disciplinary research, while others (e.g. mainstream economics and some engineering sciences) have taken more path-dependent and adversary position towards other disciplines (Klein, 1990). Parallel variety of responses can be identified in the organizational level both in private and public entities. In this context, this study can be seen as an exploration on different organizational responses to escape path-dependence. In particular, the study has elaborated the responsive management approach for foresight activities that allow the evolution of policy regime and inter-disciplinary and sectoral learning and understanding on the performance of the whole innovation system and its parts. The relevance of responsiveness in the management may increase even further if the international linkages between innovation systems become more apparent and innovations increasingly multi-sectoral and disciplinary. 9

10 References Argyris, C., Putnam, R. and Smith, D. (1985). Action Science: Concepts, Methods and Skills for Research and Intervention. Jossey-Bass, San Francisco, CA. Arthur, B. (1994). Increasing Returns and Path Dependence in the Economy. University of Michigan Press, Ann Arbor. Barré, R. (2002). Synthesis of technology foresight. In Tûbke, A., et al. (Eds.), Strategic Policy Intelligence: Current Trends, the State of Play and Perspectives, Institute of Prospective Technology Studies, Seville. Checkland, P. (1981). Systems Thinking: Systems Practice, Wiley, Chichester. David, P.A. (1989). Path dependence and predictability in dynamic systems with local network externalities: A paradigm for historical economics, High Technology Impact Program Working Paper, Center for Economic Policy Research, Standford University. Dosi, G., Freeman, C., Nelson, R., Silverberg, G. & Soete, L. (eds.). (1988). Technical Change and Economic Theory, Pinter, London. European Commission. (2002). Thinking, Debating and Shaping the Future: Foresight for Europe, Final Report of the High Level Expert Group for the European Commission, April 24, 2002, Brussels. Frenken, K., Hekkert, M. and Godfroij, P. (2004). R&D portfolios in environmental friendly aotumotive propulsion: variety, competition and policy implications. Technological Forecasting and Social Change 71, 5: Klein, J. (1990). Interdisciplinarity: History, Theory, and Practice. Wayne State University Press, Detroit, Michigan, 332 pp. Metcalfe, J.S., (1995). Technology systems and technology policy in an evolutionary framework. Cambridge Journal of Economics, 19, 1: Mulder, P. and van den Bergh, J., (2001). Evolutionary economic theories of sustainable development. Growth and Change, 32: Salmenkaita, J.-P. and Salo, A. (2004). Emergent foresight processes: Industrial activities in wireless communications. Technological Forecasting and Social Change, 71,9: Salo, A. and Cuhls, K. (2003). Technology Foresight - Past and Future. Journal of Forecasting, 22: Singleteon, R.A. Jr. & Straits B.C. (1999). Approaches to Social Research (3 rd ed). Oxford: Oxford University Press. Smits, R. and Kuhlmann, S. (2003). The Rise of Systemic Instruments of Innovation Policy, forthcoming in International Journal of Foresight and Innovation Policy. Tushman, M.L. & O Reilly, C.A. (1997). Winning Through Innovation. Boston: Harward Business School Press. Unruh, G.C. (2002). Escaping carbon lock-in. Energy Policy, 30: Unruh, G.C. (2000). Understanding carbon lock-in. Energy Policy, 28: