Dilution of innovation utility, reinforcing the reluctance towards the new: An upstream supplier perspective on a fragmented electricity industry

• Published in: Energy policy 2018-05, Vol.116, p.220-231
• Main Authors: Sköld, David, Fornstedt, Helena, Lindahl, Marcus
• Format: Article
• Language: English
• Subjects: Absorptive capacity; Absorptivity; Adoption of innovations; Case studies; Clients; Consultants; Contractors; Deregulation; Deregulation Industrial fragmentation Innovation adoption/diffusion Absorptive capacity Turnkey construction contracts Innovation utility; Dilution; Electric industries; Electric utilities; Electricity; Energy industry; Energy policy; Engineering Science with specialization in industrial engineering and management; Industrial fragmentation; Infrastructure; Innovation adoption/diffusion; Innovation utility; Innovations; Learning processes; New technology; Organizational learning; Outsourcing; Procurement; Qualitative research; Reluctance; Reorganization; Suppliers; Switchgear; Technological change; Technology adoption; Teknisk fysik med inriktning mot industriell teknik; Turnkey construction contracts; Upstream; Value chain; Value engineering
• ISSN: 0301-4215; 1873-6777; 1873-6777
• DOI: 10.1016/j.enpol.2018.01.057

This paper inquires into how a reorganization of the value chain running from client-utilities to equipment suppliers within the electricity industry has altered the conditions for diffusing/adopting technological innovation. Through an interview-based qualitative case study of the development and diffusion of high-voltage switchgear, it provides a supplier perspective on how the downstream capacity to recognize and assess the potential value of innovations has fared in the face of downsized utility organizations, seeking to cut costs through aggressive outsourcing of engineering, procurement and construction activities. Highlighting how relations between end-clients and upstream suppliers – following a strategic orientation towards activities considered to be core – increasingly have become mediated by consultants and project-based contractors, the narrative analysis first suggests that this has stolen the industry of important inter-organizational learning processes. This in ways that have reduced the ‘absorptive capacity’ of the utilities sector. Second, the analysis suggests that the contractual form that has come to dominate infrastructure projects further works to de-incentivize the adoption of new technology, by diluting the perceived utility of innovation across the array of actors populating the value chain. Thirdly, the paper calls for renewed policy measures to deal with this reinforced reluctance towards the new. •The paper discusses effects of increasing fragmentation in the electricity industry.•We argue that the absorptive capacity has been reduced in the wake of fragmentation.•Incentives for recognizing and evaluating systemic benefits of innovation are lacking.•This is hampering the diffusion of moderately radical technological innovations.•Renewed policy measures directed towards private R&D could facilitate adoption.