Essays on environmental change and innovation strategy

Kapačinskaitė, Aldona (2021) Essays on environmental change and innovation strategy. Doctoral thesis, University of London: London Business School.

Abstract

This dissertation examines the relationship between environmental change and innovation strategy. It studies different stages of the innovation process from invention, through refinement, to adoption of technology and investigates the incentives to innovate engendered by environmental change. Empirically, I study the oil and gas and wind power industries, and use three different, novel datasets in each chapter. I build on the innovation strategy literature and use granular data at the well and windfarm level in large sample quantitative empirical analyses to test hypotheses. The first chapter investigates use of a prevalent but rarely studied form of intellectual property protection: trade secrets. We explore the effect of stronger legal trade secret protection on the use of trade secrets, and the rate and nature of secret innovation. We find substantial increases in the use of trade secrets, the generation of new trade secrets, recombination across sources, and the breadth and complexity of secret invention as the appropriability environment strengthens. The results provide rare systematic empirical evidence on actual trade secret use. The second chapter investigates the link between technology characteristics and innovation opportunities. While there is theoretical consensus on innovation possibility decline over time, empirical literature remains inconclusive. We use well-level data on two crude oil extraction technologies – conventional and unconventional – that are of different vintages to examine how innovation possibilities decline with age. We estimate the productivity impact of the 2014 oil price crash on conventional and unconventional technology wells and find that unconventional wells experienced significant productivity growth while the conventional wells did not. This chapter concludes with implications for research on innovation and the S-curves literature. The third chapter studies the link between technology choice and repurposing of complementary assets. Prior literature has investigated the role of complementary assets in technology adoption but abstracted from incentive mechanisms driving the deployment of such assets. I exploit a precipitous oil price drop in 2014 to study the effect of idle capacity on repurposing of resources and capabilities from the oil and gas industry to the wind power industry. I find evidence consistent with the argument that following a downturn, multi-business firms facing a shock in another industry repurposed complementary assets and adopted new technologies in the focal industry. The study contributes to literature on technological change by highlighting the role of industry downturns on technology evolution in related industries.