Technology-push, demand-pull and endogenous drivers of innovation in the renewable energy industry

Abstract

This study aims to contribute to the long-standing debate on technology-push versus demand-pull mechanisms to support the creation and diffusion of innovations. We argue that in addition to the traditional push–pull dichotomy, technological change drivers must be differentiated by whether they are exogenous or endogenous to the economic system and must be assessed against their contribution to both the creation and the diffusion of innovation. We apply this perspective to study innovation in the renewable energy (RE) industry in 15 European Union countries. We find that public R&D investments, public policies, and per capita income positively affect either innovation creation or diffusion. However, impacts differ depending on the innovation dimension considered. Economic growth is relatively ineffective at stimulating innovation creation. In contrast, it is a strong driver of RE diffusion with a nonlinear, U-shaped impact that has both a direct cause and an indirect cause. Our findings highlight the importance of deploying diverse policy instruments simultaneously to enhance the effectiveness of clean energy policies.