Innovation and institutional change: the transition to a sustainable ...

12 Chapter 2
derive some general principles based on theoretical and empirical work of
other scholars, and in combination with insights drawn from own work
develop a conceptual framework that will guide the empirical chapters that
focus on dynamics in the electricity system.
Our approach is the following: first we introduce the work of early scholars
on principal elements and mechanisms in systems change: innovations,
institutions and their interaction. Next we outline more recent theories
relevant for the study of systems change: sociotechnical change theories
such as the large technical systems approach, evolutionary theories such as
the national systems of innovation approach, governance theories, and
institutional theories such as the new insitutionalism in organisational
analysis and ecological modernisation. A further section summarises
theoretical and empirical contributions to overall patterns of breakthrough
innovations and systems change. In 2.4 insights of various scholars are
integrated into a conceptual perspective for the analysis of systems change.
A final section summarises the most relevant findings.
2.2 Broader theories on social and economic change
Economists’ starting points
Innovations are regular phenomena in our society and often considered as a
crucial element for societal progress in the long run. Yet there is widespread
disagreement on the reasons why they come into being, on what explains the
nature of innovations, and on the ways through which they affect societal
progress, although quite a number of scholars have made impressive efforts
in this respect (among them Smith, 1776; Marx, 1890; Schumpeter, 1928,
1947; Nelson and Winter, 1982; Dosi et al., 1988; North, 1990; Freeman and
Soete, 1997; Freeman and Louca, 2001). Common for them is how they
point at the interaction of innovations and institutions as the fundamental
force for economic growth. This is implicit in the work of Smith as he
describes the shift from craftsmanship to a factory mode of production and
explains how mechanisation combined with a new division of labour
dramatically raised productivity (Smith, 1776; see also Landes, 1969 and
Freeman and Louca, 2001). Thus innovation went hand in hand with change
in forms of organisation and coordination, two principal elements of
institutional arrangements. Marx (1890) points at further institutional facets
such as the importance of property in terms of money and how this affects
labour and capital accumulation, and the way capital gained primacy over
labour as labour price becomes disengaged from value creation. His focus
was on the way capitalist institutions bring forth technical change (especially