How do firm internal and external factors combine to contribute to the propensity of energy incumbents to implement radical innovations?

• Transitioning the energy sector to meet sustainability challenges requires introducing innovative solutions for energy production, storage, flexibility, security, and consumption (Fahnestock and Karltorp, 2019). Some of these innovations will be radical compared to incumbent firms’ competence base, solutions, and market attributes (Bergek et al., 2013). Although some energy utilities embrace innovation, most of these incumbents are inert due to significant lock-in effects of infrastructures and facilities.While a larger body of research focuses on incumbents as developers of innovation (Klepper, 1997; Christensen, 1997/2013), less attention is paid to the factors that influence incumbents’ ability to implement radical innovation. A review of the comparatively few existing studies reveals that a) a combination of firm internal and external factors needs to be accounted for, b) factors are interdependent and form complex causal relations, and c) the same outcome related to adoption may result from different combinations of conditions as revealed by contradictions (Karltop and Perez Vico, forthcoming). Yet, no existing studies examine the complex casual relationships as configurations of factors that combine to contribute to incumbents’ propensity to implement radical innovations. Thus, we study how incumbent firms’ internal and external characteristics contribute to implementing radical innovation in the form of configurations of factors, using regional energy firms as empirical case.We explore this question using a qualitative comparative analysis (QCA) that enables us to consider the effects of multiple causal factors and their complex causal relationships on a particular outcome, such as the propensity to implement radical innovation (Ragin, 2008). We use a comparative case study of eight Swedish public regional energy firms to explore the influence of factors derived from a recent literature review (Karltop and Perez Vico, forthcoming) that include external landscape, financial, technology, and industry conditions, as well as firm internal structural conditions, absorptive capacity and alignment with innovation. We base the analysis on semi-structured interviews with firm representatives and qualitative and quantitative data from media, annual reports, economic databases, and funding agencies.Our analysis generates multiple solutions in the form of configurations of different factors contributing to incumbents’ propensity to implement radical innovations. These solutions reveal how factors amplify or offset each other and provide insight into different development paths for incumbents seeking to implement radical innovation. This paves the way for building a coherent theoretical frame for understanding incumbents in the light of radical innovation that accounts for multiple causes related to the firm’s structure, strategy, and external conditions.Our findings have several management and policy implications. To implement radical innovation necessary for energy transitions, firms and policy makers must simultaneously pay attention to the multiple ways in which internal and external conditions may interact. Although some factors are beyond the firm’s control, managers could focus on the factors that moderate others, as these represent an opportunity for compensation. With this study, we also contribute to the field of transition studies by exploring a configurational approach to understanding the role of incumbents in meeting sustainability challenges.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business (hsv//eng)

Publication and Content Type

ref (subject category)

kon (subject category)