Democracy, Legal Systems, and Renewable Energy and Storage Technology Innovations

Abstract

Compared to other types of technology innovations, green technology (GT) innovations produce additional public good benefits in the form of improved environmental quality enjoyed by all people in general. Yet, GT innovations tend to be undersupplied precisely because the firms inventing them are less likely to be rewarded for the enhanced environmental public goods produced by the use of these GT innovations. Hence, the institutional country context needs to be considered because it can greatly determine how firms can take advantage of the public good benefits produced by their GT innovations. We examine the impact of the political and judicial institutions on the production of renewable energy and storage technology innovations and breakthroughs in those same GT innovations with a total sample of 7,298 patents applied for between the years 1972 and 2006 across 48 countries, resulting in a total of 1,680 country-year observations. We find that civil law acts as a moderator weakening the positive effect democracy has on inducing renewable energy and storage technology innovations. It is essential for firms to understand how differences in the political and judicial systems across countries can be exploited to gain an advantage in developing GT innovations. Institutional differences can impact both sources of knowledge as well as R&D funding for firms developing GT innovations allowing them to develop technologies that produce public good benefits.