When the Wind Blows: Incumbents’ Sourcing Strategies for Wind Power

Abstract

While extant research on sustainability transitions discusses how innovations are nurtured in protective market spaces before causing change in established industries, we know less about how characteristics of these protective market spaces, policy, and resource endowments impact incumbents’ sustainability transition pathways for a new technology. We distinguish between incumbents’ choice to embrace innovation by contracting for wind power or direct ownership of windfarms. We contribute to recent calls in the literature to open the “black box” surrounding the heterogeneity in incumbents’ responses to sustainability transitions. In a sample of 801 windfarm transactions over a 14-year-time period (2004–2017), we find that characteristics of protective market spaces affect incumbents’ response: incumbents facing less experienced niche actors (windfarm developers) and acquiring greater capacities of the innovation (wind power) are more likely to own a windfarm than contract for wind power. Moreover, if the innovation has greater physical distance from incumbents’ operations, ownership is the incumbent's likely response to innovation. As policies for the innovation persists, incumbents are more likely to own a windfarm than contract for wind power. However, that relationship is weakened for firms more established in existing technologies. We contribute to the literature by demonstrating that market characteristics and policy impact heterogeneity in incumbents’ sustainability transitions.