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

18 Chapter 2
multinational producers of dairy products, ranging from conventional milk to
drink yoghurts to exotic drinks, making use of large-scale standardized
production processes, and with consumers buying the products in a variety
of outlets. Cows produce an average of eighteen liters of milk per day
compared to around eleven liters fifty years ago in a highly mechanized way
and in large-scale facilities (Bieleman, 2000: 152). Although the whole
system of milk production and consumption has dramatically changed in
almost every aspect, and this has involved dramatic changes in ways of
production, transportation and linkages to customers, it is generally not
perceived as systems change.
This leads to the conclusion that although a division between incremental
and radical innovation is conceptually clear, the connection to systems
change is more problematic. It also implies that a strict division between
incremental and radical innovation is not fruitful in the analysis of systems
change. Understanding interactions between and changes within actors,
networks and institutions and the way these produce and affect processes of
innovation and possibly result in systems change is the basis of our
approach.
Our focus in this chapter is on the reasons why new ideas, concepts or
objects (for example technologies or new forms of organisation) emerge, and
under which circumstances they provide seeds for more fundamental
changes in systems. First we discuss several theoretical streams in the
literature that have been particularly concerned with these issues starting
from an economic and/or technological perspective.
Evolutionary economics
Applying evolutionary principles and the central importance of innovation in
the economic process, in the seventies and eighties several scholars point at
the cumulative nature of innovation and the selective nature of the
innovation process (Nelson and Winter, 1977, 1982; Dosi, 1982, 1988;
Freeman et al., 1982; Rosenberg, 1982). The basic ideas in evolutionary
economics are inspired by evolutionary theories in biology (see Van der
Steen, 1999; Ehrlich, 2000) and use the concepts of variation, selection and
evolution to explain economic development. The concept of variation is in
biology associated with genes in organisms, which are fundamental to
behaviour and are passed on from one generation to another. The selection
environment, and changes within this environment, determines the type of
genes that will survive. An evolutionary path is created through changes in
the pool of genes, either by spontaneous mutation or by pressure of the
selection environment.