2nd Order Of Sustainability

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Ecological Economics xx (2005) xxx – xxx www.elsevier.com/locate/ecolecon

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Second-order sustainability—conditions for the development of sustainable innovations in a dynamic environment Christian Sartorius * Fraunhofer Institute for Systems and Innovation Research, Breslauer Str. 48, D-76139 Karlsruhe, Germany Received 5 September 2003; received in revised form 6 July 2005; accepted 6 July 2005

Abstract In particular radical innovations can be important means to achieving improved sustainability. Due to the existence of path dependency and lock-in, however, the transition from one technological trajectory to another, more sustainable one is often impeded by significant barriers. Fortunately, these barriers are by their nature subject to substantial changes in time; so, it makes sense to carefully distinguish between periods of stability (showing high barriers) in which the given trajectory can hardly be left and periods of instability (characterized by low barriers) where a new trajectory can be reached more easily. The latter distinction matters since sustainable innovations often rely on governmental regulation and the economic burden arising from this regulation will be much lower in periods of instability. Moreover, due to the complexity and dynamics of change in their respective environments, innovations are generally associated with fundamental uncertainty such that it becomes impossible to predict the degree of sustainability yielded by specific innovations in the longer run. Under these circumstances, it is essential to facilitate the change between trajectories and to allow for the possibility to select between a variety of alternative trajectories within a process of trial and error. Sustainability as viewed from this evolutionary perspective is therefore better understood as the general capability to adapt, that is, to readily change from less to more sustainable technological trajectories. Since the latter kind of sustainability determines the conditions under which the former kind (i.e. sustainability related to a specific technology) can be achieved, the two kinds are respectively called second-order and first-order sustainability. Finally, a series of determinants (and corresponding indicators) from the techno-economic, political, and socio-cultural sphere is identified which, after proper measurement and weighting, allow for making an assessment whether and when the incumbent industry is sufficiently destabilized and the political system rendered sufficiently favorable to the new, more sustainable technology such that a transition to the preferred trajectory is possible without too much effort. D 2005 Elsevier B.V. All rights reserved. Keywords: Sustainability; Innovation; Path dependence; Lock-in; Uncertainty; Indicators

1. Introduction * Tel.: +49 721 6809 118. E-mail address: [email protected].

Innovations play a crucial role not only as the basis of the persistent economic growth prevailing

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especially in developed countries since the beginning of the industrial revolution (see Schumpeter, 1934; Nelson and Winter, 1982, for evolutionary; Romer, 1986, for neoclassical perspectives on innovationdriven growth); they are also an important, if not the only, means for maintaining the sustainability of this development, that is, for avoiding destruction of the natural environment and exhaustion of natural resources that may be needed by all our descendents in order to maintain at least the current level of wealth (see Rennings, 2000 for an overview). However, innovations towards sustainability are often associated with substantial costs. From the point of view of environmental economics this is due to the fact that environmental innovations internalize external costs for which the innovator does not receive a compensating benefit. By contrast, Porter and Van der Linde (1995) claim that these costs can be substantially reduced, if, rather than merely redressing the consequences of existing technologies (e.g. by end-of-pipe solutions), innovation is understood as an integrated process avoiding environmental externalities right from the beginning. The remaining costs can even be turned into a benefit, if, due to its more fundamental character, an innovation avoids both external and internal costs. Despite the basic attractiveness of this kind of innovation, employing them is far from rendering the path towards sustainability self-sustaining for two reasons. On the one hand, all environmentally more benign substitutes after a while tend to give rise to unforeseen environmentally hazardous side effects such that, in the longer run, new technological (including organizational) substitutes have to be generated again and again. Moreover, the development and becoming effective of new substitutes takes time, allowing related technology branches to exhibit environmental externalities in their turn. Due to the higher uncertainty associated with fundamental innovations, they will show this tendency even more markedly than incremental innovations succeeding within one paradigm. As a consequence, sustainability will generally remain temporary and more or less incomplete. On the other hand, fundamental technological change requires the transition from one technology paradigm to another and, therefore, is not only less likely to occur and but also associated with higher uncertainty and risk than innovation along a given

trajectory (Dosi, 1982, 1988). Accordingly, the frequency of environmentally sound and economically profitable fundamental innovations will remain low unless they are supported by policy instruments specifically referring to the causes of paradigm formation and the related lock-ins. Klemmer et al. (1999) to some extent point in this direction when they acknowledge that a mix of regulative measures is needed to properly account for the complexity of circumstances in which innovation arise. In this paper, both time and uncertainty will be accounted for more thoroughly as crucial conditions of technological development in general and especially with regard to sustainability. In particular, it is assumed that, along with the change in circumstances, periods of stability of a given technological trajectory (where establishing a new paradigm requires much effort) alternate with periods of instability (where such a shift is more easily achieved). It is further assumed that it is possible to identify and even strategically use the latter phases of instability in the search for the lowest possible cost of achieving a higher degree of sustainability. In order to justify this claim, Section 2 starts with a discussion of the relevance of innovation in the context of sustainability from both the neoclassical and ecological economics’ perspective. In Section 3, an evolutionary framework is used to show how potential progress towards greater sustainability by means of innovations may be hampered by complexity, uncertainty, path dependency and lock-in. While identifying the strategic elements for overcoming these shortcomings, Section 4 specifies the conditions for the more ready identification and implementation of sustainable innovations—a property we call second-order sustainability because it refers to the dynamic interrelation between innovations rather than the innovations themselves. In order to make use of this dynamic concept of sustainability, Section 5 identifies a variety of its potential determinants and indicates how they may be applied. Finally, conclusions are drawn in Section 6.

2. Innovation and sustainability A very wide-spread understanding of innovation is reflected in the definition used by the OECD (1997), which distinguishes (1) process innovations allowing

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to produce a given quantity of output (i.e. goods or services) with less input, (2) product innovations characterized by the improvement of existing, or the development of new, goods or services and (3) organizational innovations including new forms of management. While the exact meaning of even this relatively simple definition of innovation depends on the methodological and normative background assumed by its respective applicator, it is even more difficult to relate to each other the concepts of innovation and sustainability. In this section, I will try to elucidate this relationship first from the neoclassical and then from the ecological economics’ perspective. 2.1. Environmental innovation in the neoclassical context While, in the above-quoted OECD definition, process innovation is explicitly efficiency-oriented, the meaning of improvement or novelty in the definition of product innovations is not further specified. If, as is often done in economic contexts (see e.g. Rennings, 2000), the notion of innovation is further qualified by its distinction from the term invention, the explicit reference to the marketability of an innovation implies that also product innovation is considered in terms of efficiency, providing more benefit (as revealed by the customers’ willingness to pay) at the same cost or the same benefit at the lower cost. So, in the (neoclassical) economic context, the complete monetary commensurability of costs (for inputs) and prices (for outputs) renders it fairly easy to identify innovations in a given set of new processes or products.1 By contrast, maintaining this commensurability is essentially impossible, if the above concept of innovation is to be extended beyond the realm of human preferences—for instance into ecological sustainability (compare Munda, 1997). In particular since the beginning of the industrial revolution growing human production and consumption led to ever more frequent, more persistent and more severe adverse impacts on the natural environment, representing an overall increase in economic sustainability (i.e. persistent growth) at the expense 1

In this context, organizational innovations are not mentioned explicitly because, with regard to their input–output relation, they can be treated like either process or product innovations.

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of ecological sustainability.2 Neoclassical environmental economics tried to resolve this trade-off by determining (shadow) prices for those uses of nature giving rise to negative external effects and imposing them by means of Pigou taxes and allowance trading (Pigou, 1920; Coase, 1960). Although functional in the neoclassical setting, both approaches often proved to be ineffective in practice for two reasons. First, due to asymmetries in the stakeholders’ endowment with knowledge and other resources and the public good character of most parts of the environment, it is impossible to determine the true willingness to pay (i.e. the price) for the services of nature with sufficient accuracy. And, second, even if this price could be determined sufficiently exactly, it may be doubted whether the two targets of satisfying the needs and wants of humans and meeting the requirements for the natural environment to sustain could be brought to coherence. Reasons for this are, among other things, the difference in time horizon between myopic humans and long-term processes in nature and, most of all, the basic ignorance of most individuals concerning the wide variety of cause–effect relationships in nature (I will deal with this point more extensively in Section 3). From the neoclassical perspective, this implies that the economy within or, respectively, without its natural environment would not converge to the same equilibrium and, therefore, possible disturbances 2 Since the Brundtland report (WCED, 1987) sustainability is usually discussed as a state or, better, a development in which three kinds of interests are met simultaneously: (1) the interest of the present generation to generally improve their actual living conditions (i.e. economic sustainability), (2) the search for an equalization of the living conditions between rich and poor (i.e. social sustainability), and (3) the interest in an intact natural environment that is capable of supporting the needs of future generations (i.e. ecological sustainability). Since social sustainability including the (re)distribution of natural resources and the benefits drawn from their use are subject to intense political discussion and continued negotiations especially between developed and developing countries, the normative character of this issue is readily accepted as an argument to exclude it from the scientific discourse. Although balancing the interests of succeeding generations is a normative issue as well, the lacking possibility of the future generations to participate in the corresponding political discussion is in this case taken as a justification and as a potential for science to make fruitful contributions. Consequently, the discussion of sustainability particularly among economists essentially focuses on the question how to allow for the strongest possible growth now without compromising the potential for growth to persist in the future.

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of the economy–ecology relationship cannot be corrected by merely relying on the market mechanism (Rennings, 2000). 2.2. Strong sustainability and innovation As a consequence of the failure of market competition alone to induce the innovations necessary to bring about ecological sustainability, a different approach has to be used. In search for such an approach, it is worthwhile to look more closely at the distinction between weak and strong sustainability and at the sustainability indicators developed in relation to the latter concept. From the anthropocentric point of view, sustainable development implies the preservation of a pool of natural resources and man-made capital that provides each generation with the opportunity to have its activities based on equivalent sets of man-made and natural capital. This conceptualization of sustainable development as bnon-declining wealthQ (Pearce et al., 1989) finds two basically different expressions. On the one hand, economists in the tradition of Hartwick (1978) and Solow (1974, 1986) argue that a society using an exhaustible stock of resources could enjoy a constant stream of consumption over time if it invested all the rents from tapping on those resources, that is, if it held the overall capital stock constant. Evidently, this weak approach to sustainability is based on the implicit assumption that both natural and man-made capitals are complete (i.e. reversible) substitutes. While this assumption may be met in some cases, it does not hold in general because, first, for many types of natural assets (e.g. an endangered species, a habitat or the ozone layer) technical substitutes do not exist and once brought about many changes turn out to be irreversible (Munda, 1997). Moreover, the argument developed above clearly indicates that the mechanisms for specifically identifying and implementing suitable technologies or inducing necessary innovations do not exist in the neoclassical framework underlying weak sustainability. On the other hand, concepts of strong sustainability, which are characteristic for ecological economics, specify the natural capital in terms of its physical function rather than the costs of actual damage caused to it. The logic of this approach is based on the assumption that, in order to continue to rely on certain

essential functions of the environment (e.g. assimilation of waste or supply with resources), the ecosystem or at least certain parts of it have to be kept intact. Accordingly, substitutability has to be proven in each specific case rather than simply being assumed. Although this approach does not exclude monetization in principle (e.g. in terms of the opportunity costs of the avoided or restricted use of the environment), the (how ever aggregated) monetary figure does not suffice to eventually specify the state of sustainability. Instead, it is necessary to follow the following threestep procedure and to (1) identify those elements of the natural capital that are essential for the maintenance of the ecosystem’s stability or, better, its ability to recover from distressing impacts (i.e., resilience), (2) select those elements that are related to, and possibly endangered by, economic activities, and (3) derive a set of indicators each of which reflects the actual condition of a specific aspect of the environment and puts it into relation to the sustainable state as determined by any suitable management rule (see Opschoor and Reijnders, 1991). Typical examples of the latter approach are Pressure-State-Response (PSR) indicators like the one employed by the OECD. Here, the causes of environmental problems (bpressureQ), the actual state of the environment (bstateQ), and efforts to solve the problem (bresponseQ) are monitored and quantified in separate modules (OECD, 1993). The role of innovation in the latter framework consists in modifying existing, or implementing new, technologies in such a way that identified pressures are relaxed and problematic environmental states are improved. So far, however, this concept is still quite limited such that it needs further qualification and extension. 2.3. Critical loads and non-linearity An important qualification of PSR-like schemes refers to their implication that it is generally possible to quantify the effect of an innovation in terms of reduction of those processes or their side-effects that caused the corresponding pressure in the first place. In reality, however, many counter-measures later turn out to be themselves not without side-effects such that the relaxation of pressure in their target field may go along with the increase of pressures in other fields.

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Rennings and Wiggering (1997) explain how this lack of innovative efficiency arises. The logic underlying the PSR approach implies a correlation according to which stronger (weaker) efforts to counteract an environmental problem by means of the best-available technology generally lead to the alleviation (enhancement) of the pressure and, thus, to the improvement (deterioration) of the condition of the environment. Unfortunately, in the natural environment, such a blinearQ relation between causes and effects is not the rule. In contrast, effects like the following are frequently observed. Although in an agriculturally dominated region the intense use of mineral fertilizers was common practice for quite a while, contamination of the ground-water with nitrate could be observed only recently—with a strongly increasing rate. In this case, the existence (and transgression) of carrying capacities or buffer capacities gives rise to non-linear processes which typically show sudden changes or even jumps. Returning to a sustainable state then not only requires the reduction of emissions below the respective critical load or critical level. Since the latter may itself be adversely affected by the harm, it additionally requires the repair of the damages that had so far been caused by the excess emissions. With regard to the role of innovation as a constituent of response in the PSR scheme, the non-linearity basically implies a substantial element of uncertainty. However, uncertainty is not limited to the adverse effects that innovation is supposed to reverse. The innovation itself is a source of uncertainty in so far as it can be the source of lacking sustainability unforeseen at the moment of its implementation. More about the causes of uncertainty and approaches to deal with it will be said in the following.

3. Sustainable innovations and the evolutionary perspective Section 2 has elaborated on the possible impact of innovation on ecological sustainability and on the dependence of this impact on the underlying concepts of sustainability and the economic paradigms related to them. It could be shown that the preconditions for innovations effectively responding to emerging ecological challenges are rather demanding. This is not only due to the basic structural complexity of inter-

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action between a wide variety of elements in the economy as well as in the natural environment; it is even more due to the specific temporal interrelatedness of these elements. In order to deal with these difficulties, a closer look will be taken at concepts like uncertainty, irreversibility, path dependency and coevolution which are closely related to innovation in the sustainability context and in general and extensively discussed in the evolutionary branch of economics. 3.1. Fundamental uncertainty and the trial-and-error approach of evolution It is the wide variety and high complexity of interactions between human actors and between the latter and their natural environment that renders human (economic) activities as well as their environmental effects highly unpredictable particularly in the long run (see also Section 2.3). However, the uncertainty accruing in this context is not just a matter of probability distributions within a known or assumed set of possibilities and therefore cannot be accounted for by the concept of risk. Instead uncertainty is better characterized as ignorance in the face of novel, fundamentally unpredictable, events. So the question arises how to deal with this fundamental uncertainty. If complete knowledge about the set of available alternatives is lacking, actors cannot maximize the expected utility of alternative choices and, thus, rational decisions cannot be made. One approach to the solution of this problem was made by Simon (1957) who proposed that human decision-making in situations of incomplete knowledge may better be described as being based on bounded rationality. However, the boundedly rational decision-maker’s striving for an acceptable (i.e. dsatisficingT) rather than a maximum level of utility still requires some knowledge as to which goals are attainable in principle. Additionally, even bounded rationality assumes fixed sets of individual preferences that basically include all possible alternatives—an assumption that simply turns out to be underdetermined in the face of real novelty. Therefore, it may be advisable to look at the solution of (long-run) problems related to fundamental uncertainty and endogenously changing preferences from a completely different perspective: Darwin’s approach to evolution in nature. Like society, nature

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is characterized by the complex interaction between its constituents, the living organisms and their physical environment, and thus by the existence of fundamental uncertainty and non-linearity which together can give rise to the formation of new species or the sudden extinction of major parts of the existing biosphere as well as for the persistence of existing species over prolonged periods of time. In order to bmanageQ such unpredictable processes, nature relies on the principles of heritance, random variation and natural selection—with diversity created by random mutation and recombination within the existing genetic pool and selection resulting from continuous competition between species with inherited properties for a limited set of resources. A further step toward an increased problem solving capability in nature and, ultimately, in man is based on the capability of an organism to undergo specific or individual adaptation to varying circumstances and to transmit the acquired knowledge to other organisms— that is to learn and communicate. While evolution on this level is based on social norms, individual values, and ideas rather than material genes, the basic principles nevertheless remain essentially unchanged (Sartorius, 2003, especially chap. 4). Initially, the perception of a problem leads to the assessment of a variety of alternative approaches to its solution. Those approaches giving rise to the solution of the problem are selected; those that fail are rejected. The solutions with the better performance are further modified and tested in subsequent rounds of selection.3 The wider the variety of alternative approaches the higher is the probability that at least one of them may perform better than in the status quo. With respect to human behavior, special use of evolutionary principles has been made by many proponents of evolutionary economics: in his search for new business opportunities, for instance, Schumpeter’s (1934) entrepreneur assumes significant risk but, at the same time, gives rise to novelty; Hayek (1978) interprets market com3 Note that selection of the best alternative would only be possible in a static environment with very low complexity. In reality, the higher degree of complexity leads to the emergence of local rather than global optima and, due to the dynamics of the system, the successive choice of better alternatives influences the actual specification of the respectively best alternative. Therefore, selection in the evolutionary approach adopted here refers to the better, but not to the best (see also Rammel, 2003).

petition as a process of selection (and detection) of innovations by means of the willingness-to-pay on the demand side; and Nelson and Winter (1982) show how profit may serve as the selecting force that leads to the persistence of some innovations and to the vanishing of most others. A particular case of evolution leading to the solution of unprecedented problems is the selection of cooperation rules on the group level, a task that could never be fulfilled by individuals on the basis of their mere rationality (Hayek, 1988; Sartorius, 2002). In this context, environmental and social sustainability can respectively be interpreted as cooperation (i.e. fair behavior with the potential of win–win situations) between succeeding generations and different parts of the same generation. The relevance of fundamental uncertainty and the corresponding problem-solving capability for sustainability is quite evident. Human activities frequently generate adverse environmental side-effects which, due to the complexity of their interaction with the environment, are often unforeseen (see Section 2.3). In the search for (long-term) sustainability, it therefore makes little sense to exclusively rely on the causes of, and solutions to, specific environmental problems since they may be subject to considerable variation over time. This does not at all imply that the determination of critical substances and the application of critical thresholds do not make sense. Especially in the short run they are even indispensable. However, in the long run, that is, in the time perspective in which the sustainability concept is usefully applied, the process leading to sustainability also has to account for the conditions under which the identification of problems as well as the search for the corresponding solutions and their translation into the appropriate measures takes place. Rather than referring to specific innovations whose characterization as being sustainable can only be temporary, sustainability should be viewed as a property of the system and determined with reference to the system’s general capability to bring about a variety of potentially useful innovations and, should the occasion arise, to allow for the ready implementation of the most promising alternative. In short, sustainability also, and from the evolutionary perspective predominantly, includes the flexibility and versatility of the entire system to allow for a quick and effective response to whichever environmental problem arises (see Erdmann, 2000).

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3.2. Coevolution and the extension of innovation beyond the technological sphere The concept of coevolution basically refers to the fact that the development of an organism does not simply follow the conditions set by its environment, but that, in the process of adaptation, the organism itself is a source of change for this environment. In biology, coevolution usually describes the mutual adaptation of ecologically related species such as butterflies and plants (e.g. Ehrlich and Raven, 1964) which, under certain circumstances, can give rise to an arms’ race known as the Red Queen effect. In ecological economics, coevolution refers to the socio-economic development as a process of adaptation to a changing environment while being itself a source of this change (Norgaard, 1994; Gowdy, 1994). While evolution in the socio-economic sphere was shown to have the potential of giving rise to better adaptation to the natural environment (Cavalli-Sforza and Feldman, 1981; Boyd and Richerson, 1985), coevolution in this context typically accounts for the mutual interference between socio-economic and natural developments which, depending on their specific characteristics, can facilitate or hinder innovation processes leading to lesser or greater sustainability. In the case of spraying pesticides in agriculture, for instance, the formation of resistance is a clear indication for a decrease in sustainability. With regard to sustainability-related innovations, coevolution has several crucial implications. First, the mutual interaction between several social spheres increases complexity giving rise to a higher degree of uncertainty that needs to be managed by human actors trying to pursue a sustainable development (see Section 3.1). Second, coevolution involving the social or cultural sphere has the potential of giving rise to a high degree of diversity with regard to flexibility and adaptability to temporally or spatially varying conditions (Munda, 1997). This potential is however contrasted by the possibility of the Red Queen effect which is likely to give rise to maladaptation and the reduction of diversity. These two opposing effects are the basis for the trade-off between diversity and flexibility on the one hand and economic efficiency on the other (Rammel, 2003), which will be further discussed in Section 4.

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Third, the coevolution (especially the Red Queen effect) is an intriguing example of path dependence where the developmental path can not easily be shifted from one trajectory to another (see Section 3.3). Forth, and most evidently, coevolution implies that successful innovation in general, and successful sustainable innovation in particular, has to acknowledge the involvement of, and mutual interaction between, more than the mere technical and economic spheres. The current human way of life being coherent with the existing institutions (including codified rules and social value and belief systems) and giving rise to technology-caused transgressions of the sustainability boundary in many and profound ways and, contrariwise, the support of this lifestyle by just these techno-economic conditions are an evident instance of coevolution. Accordingly, efficiency changes under the proviso of sustainability may be achieved more readily through an integrated approach employing institutional or social in addition to technical innovations. With regard to the aim for increased sustainability, it is therefore necessary to broaden the view from the merely technical towards the social and political aspects of innovations. In accord with these thoughts, Klemmer et al. (1999, see also Rennings, 2000) broadly define the term denvironmental innovationT as all measures of relevant actors that lead to the development and application of new ideas, behavior, products and processes and, thereby, contribute to a reduction of environmental burdens or to ecologically specified sustainability targets. This may include process and product innovations, organizational changes in the management of firms, and, on the social and political level, changes in environmentally counter-productive regulation and legislature, consumer behavior, or lifestyle in general. This emphasis on social innovations is all the more important because unsustainable development itself is often the result of btechnology outpacing changes in social organizationQ (Norgaard, 1994, p. 16). Moreover, after an intense and extended discussion in environmental economics about the brightQ instruments towards an environmentally sound, sustainable development, it more and more turns out that there is not a single suitable instrument. Instead, it seems to depend on the respective circumstances (e.g. type of competition or existence of information asymmetries), whether Pigou taxes, markets for pollution rights, the setting of stan-

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dards, or even temporary subsidization of promising innovations is the more effective instrument (Rennings, 2000). Jaenicke (1999) even goes one step further by claiming that the relevance of instruments for environmental policy has generally been overemphasized. Instead, the discussion should focus on other elements of a successful environmental policy such as long-term goals, mixes of instruments, policy styles, and constellations of actors. Altogether, the above emphasis on social and political aspects makes clear that the success of sustainable innovations depends on more than their mere technical (or even economic) superiority. This is all the more evident when, following the suggestion of Section 3.1, sustainability is considered as the property of an entire system rather than a specific innovation. 3.3. Irreversibility and path dependence Beside fundamental uncertainty and the need for diversity following from the preceding sections, the complexity of multiple-interaction systems has another at least equally important consequence for the sustainability discussion. If the sequence of events within a complex system was described by means of several independent parameters, careful analysis would reveal non-ergodicity. That is, of all basically possible states only some are likely to occur in any single moment. Whether or not a given state is likely to arise accordingly depends on the past or, more exactly, on the succession of states preceding the actual state—a phenomenon called path dependence. In biology, this issue is discussed among evolutionary biologists and ecologists in the context of the phylogenetic development of organisms and successions in ecosystems. Gould and Eldredge (1977), for instance, emphasize that the complex architecture of all more advanced organisms strongly limits the potential for successful further mutations and, thus, better adaptation. The reason for this is that most changes that may be advantageous from an isolated perspective may not be so in a complex context in which advantageousness requires the meeting of many strict preconditions. As a consequence, a variety of mutations would have to come up simultaneously which is very unlikely to occur. So, once a certain amount of genetic information has accumulated within an organism and hap-

pened to be arranged in a sufficiently complex system of mutual interaction, the entire system is stabilized against further change (Waddington, 1969). Interestingly, the parameter decisive for the stability of the system is the average number of interaction from one element to others and not so much the number of genes (Kaufman, 1995). With regard to sustainability, path dependence plays a particularly important role in three respects. First, as shown above, the wide variety of life forms in nature represents a large source of solutions for problems not only in the natural environment but also in the human sphere—for the assimilation of wastes, the production of food, and the design of pharmaceuticals, to mention just a few examples. Every species evidently represents a piece of knowledge that could potentially be useful for present or future generations. Against the backdrop of path dependence, however, it is also clear that the loss of any species leads to a loss of such knowledge that is irreversible. For every species is the outcome of a succession of phylogenetic stages in which the formation of every single stage is based on the existence of its respective predecessor— a fact that renders it impossible to reconstruct a species once it has been lost. Second, even when knowledge is not directly acquired from models in nature, but derived through trial and error in the scientific process, this does not imply that all knowledge is equally accessible. Instead, technical knowledge generation is characterized by technological paradigms (Dosi, 1982, 1988). Within such paradigms, knowledge acquisition occurs gradually along the respective trajectories—by the systematic variation of single parameters and the selection of those variants showing the desired effect most markedly. Incremental innovations proceeding along such a path are to some extent predictable but the marginal cost-to-effect ratio is subject to increase such that maintaining the profitability (in economic terms) of innovations becomes increasingly more difficult. With regard to sustainability, end-of-pipe solutions fit into this category because they add environmental soundness to an existing technology. According to economic wisdom, they do this at increasing marginal costs. An alternative route is the search for radical innovations leading to a transition between trajectories in different paradigms. While this approach

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has the potential of achieving much better profitability in economic contexts, it is characterized by a high degree of uncertainty representing a substantial threshold for typically risk-averse people. In the sustainability context, Porter and van der Linde (1995) emphasize that integrated environmental innovations (where harm is avoided from the beginning rather than redressed after its generation) can be so efficient that the environmentally beneficial effect induced by suitable regulatory measures is achieved at no additional cost. The third aspect of path dependence to be addressed here refers to the induced resistance-tochange and, thereby, to some extent relates to the second. It plays an important role in the discussion about technology development and is of central importance for the objective of this paper: the search of determinants for a sustainable technology development. Innovations and the introduction of new technologies often are the key instruments to the (temporary) avoidance or redressing of adverse environmental effects. However, even if negative external effects were completely internalized and the new technology turned out to be technologically and environmentally superior to the existing one, successful commercialization and diffusion into the market cannot be taken for granted. A frequently quoted example for this kind of failure of a superior technology to prevail refers to the design of typewriter and computer keyboards (David, 1985). Although the totality of users could benefit from the use of a better design that allows for a significantly higher writing speed, the traditional QWERTY keyboard is maintained because just for the first users of any new alternative, a deviation from the dominant design would cause costs that are much higher than the expected benefits (Arthur, 1988). While network externalities are the relevant factor in the latter case, a variety of other effects will be identified in Section 5 that lead to the lockin of a conventional technology and, accordingly, to the lock-out of its superior challenger.

4. Second-order sustainability While traditional approaches to achieving (strong) sustainability typically start with the identification of the technical or social causes of a current lack of

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sustainability and then point to possible alternatives, the implications of fundamental uncertainty, coevolution and path dependency go far beyond such an assessment of specific innovations. In order to accordingly develop a more comprehensive conception of sustainability, it is necessary to return once again to the shortcomings of the traditional approach of attaining sustainability. 4.1. Knowledge gain through trial-and-error First, in most societies, and all the more in all advanced economies, the common wealth is yielded by the complex interaction of numerous individuals in the context of a variety of technologies and social and political institutions. Due to the uncertainty prevalent in such complex systems (see Section 3.1), it is impossible to predict all the specific effects of any human intervention. This argument explains the sometimes low success in fitting a new technology or institution into a given setting in general. And it particularly explains the frequent failure of technical or institutional innovations in terms of sustainability. As a consequence, the search for increased sustainability, while in principle being the result of human action, will usually not be the well-specified outcome of a man-made plan. Hayek (1973) referred to this phenomenon as the bfailure of constructivist rationalismQ and identified man’s constitutive lack of knowledge as its main cause. Instead of looking for the one and only perfect substitute, Hayek suggests, it therefore appears much more promising to engage into a trial-and-error process based on a variety of potential substitutes. 4.2. Diversity as precondition for trial-and-error The second argument in disfavor of the specific replacement of a non-sustainable technology (or institution) also refers to the uncertainty aspect, but it focuses on the effect of dynamic change rather than the mere lack of knowledge. Since, in a complex system, the change in one component always gives rise to a change of the restrictive conditions for all others (compare the discussion of coevolution in Section 3.2), it is little surprising that sustainability as achieved by the employment of whichever technology or institution (e.g. property rights or social pre-

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ferences) can only be a temporary state of a system. Even those interventions that successfully redress instances of lacking sustainability at first will themselves change the entire system in such a way that new losses of sustainability are likely incurred in the future—either due to their interaction with other components or directly by themselves. In order to maintain sustainability over longer periods of time, it is therefore not sufficient to simply solve a given problem; rather the problem-solving capacity must keep pace with the rise of new problems. So, the Darwinian process of trial-and-error has to cope with time—a scarce resource especially in dynamic systems; and in order to do so, two preconditions need to be met which at first appear to be given quite naturally, but in fact do not come for free. Variation, the first precondition, implies the existence of a wide variety of potential alternatives on which selection can act. For socioeconomic systems in general, Matutinovic (2001) shows that diversity is a systematic and resilient property the lack of which could provoke instability and eventually lead to the collapse of the system. Since in present-day economies the selective effect of market competition is rather strong, selfsustained maintenance of a high degree of diversity cannot be taken for granted. Especially with regard to the uncertainty associated with long-term sustainability problems, it may therefore even be necessary to actively keep competition in a more early stage— against the self-enforcing advantages of productivity-increasing specialization (see Kemp, 1997). Accordingly, it is evident that this diversity is costly since, (1) for the supply of promising technologies society needs to promote learning, that is, to invest into human capital. More specifically, incentives for an engagement into R&D have to be provided for the respective firms. (2) Prior to eventually reaching market diffusion and successful commercialization, particularly the more radical inventions may additionally need governmental support (e.g. through subsidization or the creation of niche markets). (3) Finally, the partial suspension of market forces needed to maintain a certain degree of diversity and keep competition in an early stage not only leads to the less efficient adaptation of technologies to the existing uses; (4) it also prevents part of the cost-saving potentials of economies of scale and scope or learning effects from being realized. The trade-off we face here is

one between (short-term) economic and (long-term) sustainability-related efficiency. 4.3. Lock-in resolution as precondition for trial-and-error In contrast to the preceding arguments, the third argument against the possibility of an easy substitution of more sustainable technologies–and respectively the second precondition for the successful employment of trial-and-error processes–relates to the systemic integration of established technologies and institutions rather than their potential substitutes. For even in the presence of a variety of alternative solutions, selection and further development of the most suitable technology by means of the market forces will remain ineffective so long as the established technology is subject to strong stabilization and withstands its displacement by even strongly superior alternatives.4 In Section 3.3, this resistance to change of the established technology known as lock-in was shown to be caused by a wide variety of effects of which a more complete account will be given in Section 5. Sustainability is particularly affected by such a lock-in because the more radical–and thereby often more effective–innovations (Rennings, 2000; Ashford, 2002) face more opposition than the less effective incremental ones because they belong to a new paradigm. To the extent that lock-in effects are to be undermined, economic actors again have to bear the cost of refraining from the realization of the corresponding economies of scale, learning and network effects, etc. (see Section 4.2). Although, this time, the trade-off between short-term and long-term efficiency is basically a purely economic one, it has important consequences for sustainability. 4

The careful reader will have recognized that, on the one hand, the proposed approach relies on the selective capacity of (market) competition to identify and gradually improve more sustainable technologies while, on the other hand, competition has to be partially suspended in order to create the diversity on which selection can act. This apparent contradiction is resolved by temporal, spatial or functional disjunction of the two functions. While temporal disjunction can be achieved by the mere alternation of phases of variation and selection, spatial and functional disjunction, respectively, imply implementation and testing of new technologies on a locally or application-specific markets. The latter two approaches also constitute the basis for strategic niche management (Kemp et al., 1998).

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4.4. Second-order sustainability as adaptive flexibility While the specific problem-solving capacity of certain innovations gives rise to sustainability in specific circumstances and for limited periods of time, it is the total number of such solutions or, more concisely, the context-dependent trial-and-error process giving rise to their implementation that brings about sustainability in more general terms—in the long run and in dynamic contexts. The latter idea conforms well with the view of Kemp (1997), Van den Bergh and Gowdy (2000), Rammel and Van den Bergh (2003) and Rammel (2003) that sustainability is the result of a strategic process (rather than a certain state) trying to deal with uncertainty and unpredictable emerging properties by means of badaptive flexibilityQ. This emphasis of the process character does, of course, not render specific sustainable innovations dispensable in the search for sustainability in general, but due to their conditional effectiveness they represent sufficient (rather than necessary) conditions of sustainability whereas the conditions for the effective working of the basic trialand-error process are necessary (but not sufficient) ones. Since, from the functional perspective, bgeneralQ sustainability determines the conditions under which bspecificQ sustainability can be achieved, the two kinds of sustainability describe the function of a system on two different levels with general sustainability representing the more basic level. Since sustainability, and more so its lack, is immediately perceived as specific instance of resource or environmental problems whereas the working of its general problem-solving capacity (albeit more fundamental) is less immediately evident, I refer to the two aspects as first-order and second-order sustainability, respectively. In the preceding parts of this section, a variety of measures was mentioned that would increase diversity, improve selection and, thus, support second-order sustainability, but most of these measures would come with significant (opportunity) costs only. Conversely, the lack of second-order sustainability caused by the unwillingness to pay this price leads itself to the incapability to adapt to changing circumstances and, thus, to a loss of welfare that arises from the high cost of redressing or functionally replacing a damaged environment. In this trade-off between the costs and benefits of second-order sustainability, the optimum degree of diversity is not easily determined ex ante. However,

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also this optimum can be approached in a trial-anderror manner—by the gradual change and subsequent assessment of the conditions for second-order sustainability particularly in those industries and economic sectors where the most severe violations of first-order sustainability are encountered.

5. Determinants of second-order sustainability In Section 3.3, it was suggested that certain structural properties of a given technology can severely restrict the probability with which new innovations may become effective. The way in which these states of rigidity are sometimes discussed (David, 1985) or modeled (Arthur, 1988) in the literature could imply that such states of stability are omnipresent and, once they turn up, tend to persist for prolonged periods of time. Not surprisingly, many economists (e.g. Liebowitz and Margolis, 1994) are convinced that latter position crossly overstates the relevance of network externalities, as this would allow them to become the cause of almost ubiquitous market failure. In the latter debate, an intermediate position is taken by Witt (1997) who, while principally acknowledging the relevance of network effects, limits their general importance for the function of the market to certain restricted periods of time. So periods of stability tend to alternate with periods of instability where new networks can be formed. Such a period in which the direction of technological progress is flexible is referred to as a bwindow of opportunityQ (Witt, 1997). Disregarding these windows could severely hamper, if not completely inhibit, the introduction of any useful innovation. And even when, in the pursuit of sustainability, a new (sustainable) technology was successfully pushed by governmental regulation with no regard at the specific circumstances, the difference between stable and unstable phases would be worth a lot of money. It will therefore be the main objective of this section to identify those factors that allow political and other decision makers to make a wellfounded judgement as to whether the preference for a potentially sustainable innovation is based on economic, social and political feasibility. The first set of factors will be economic ones. It will become evident in the following that the variety of relevant effects is wider and their respective time

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pattern more diverse than may have been implied by the repeated reference to network externalities in previous parts of this paper. Additionally, it is a special characteristic of many sustainable technologies that, beyond the competitive disadvantage frequently arising from their failure to internalize reduced external costs, the government typically plays a crucial role in overcoming existing barriers to competitiveness in the relevant markets. In doing so the government inevitably faces opposition from those whose interests are negatively affected: the incumbent industry and other groups paying the price for the measures taken. Typically, a government or policy makers in general are not inclined to neglect such an opposition unless the promoting forces from other parts of the society are sufficiently strong. More so, major techno-economic changes require a general openness or even a readiness to change (i.e. a phase of instability) on the part of the political system. For these reasons, the technoeconomic factors will have to be supplemented by both, political and social factors. The selection of these criteria occurred on the basis of a priori theoretical plausibility considerations and ex post after the screening of relevant case studies (Sartorius and Zundel, 2005). Due to the large number of relevant factors, it is not possible to present them here at length; for a more detailed discussion, the reader is therefore referred to Sartorius and Zundel (2005, ch.2). 5.1. Determinants of (in)stability in the techno-economic system 5.1.1. Economies of scale Economies of scale account for the greater efficiency of larger manufacturing devices. They are typically measured on the firm level in terms of average unit cost as a function of output rate. As these average costs decrease with increasing scale, they give rise to strong competitive disadvantage for new technologies which, at the beginning of their life cycle, cannot immediately engage into large-scale production. 5.1.2. Economies of scope Economies of scope account for synergies between different production lines from the common use of certain resources, intermediate products, or production facilities. While economies of scope lead to important cost decreases for the established industry, the mutual

dependencies between existing processes renders it more difficult for a radically new technology to become competitive. 5.1.3. Learning by doing Unlike the cases of economies of scale and economies of scope, the cost decreasing effect of growing experience in designing, constructing (dlearning by doingT), and using production facilities (dlearning by usingT) is usually expressed as the percentage of cost/ price reduction per doubling of the cumulative production output in the respective branch. While learning effects give rise to a large potential for further cost reductions for any new technology, they confront it with a high cost disadvantage in the beginning. 5.1.4. Network externalities Network externalities refer to the fact that the utility derived from the use of a given technology is positively correlated with the number of its users. Alternatively, a technology can be subject to network externalities if it relies on another technology that forms a network in its turn. The weaker the dependence on the established network or the better the compatibility, the smaller is the entry barrier for the new technology. 5.1.5. Sunk cost Investment into a new technology can cause significant sunk costs if it renders useless an old technology prior to its complete depreciation. While sunk costs represent opportunity costs of any new technology, they do not come to bear in competitive markets. Instead, they are relevant whenever market access is restricted by other causes. The rate of capitalization in the relevant industry and data about the investment cycle can be used to assess sunk costs; but this analysis needs to be supplemented by the competitive structure of the industry in question (see below). 5.1.6. Market structure Although natural or regulated oligopolies or monopolies do not exclude competition in principle, such market structures will provide the corresponding firms with strong incentives to maintain the existing market barriers, engage in strong activities to preserve these monopoly rents and neglect innovative activities. While the innovation-related forces of market competi-

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tion may be characterized as biased in favor of the established technology by (above-mentioned) increasing returns to adoption, any non-competitive market structure will stabilize the technological status quo even more because it does not give rise to innovation in the first place. 5.1.7. Potential versus risk In order to replenish their earned innovation rent and, thus, maintain their current profit margins within a competitive market environment, entrepreneurs occasionally have to complement their technological portfolios with more radical innovations. Since the latter are associated with higher risk, an (expected) strong potential (including its regulatory conditions) will be decisive for the success or failure of this technology being adopted. 5.1.8. Demand To be considered an economic substitute for an existing technology, a new technology at first has to fulfill certain functions of the former. In order to attract the attention and raise the specific demand of consumers and investors that would prefer the more familiar, established technology over its otherwise quite dissimilar counterpart, a new technology has to fulfill certain extra-functions to overcome this inertia. 5.1.9. Niche markets If the entry barrier for a new technology is high, it may need a long period of subsidization until general competitiveness is achieved. At the same time, partial competitiveness may be achieved much sooner under certain, geographically or culturally specified, favorable conditions—often called a niche market. Since the existence and extent of niche markets can be decisive for reaching competitiveness of a new technology in general, the strategic use or the artificial (regulatory) creation of such niche markets can be an important approach to the successful implementation of a new technology as suggested by the strategicniche-management approach of Kemp et al. (1998). 5.2. Determinants of in-/stability in the political system The basic characteristics of the political system generally play an important role in allowing a new, more sustainable technology to prevail. As a precon-

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dition for this to happen, the political system either must be in favor of the new technology from the beginning or it needs to be destabilized itself in the first place. While in the former case, structural characteristics of the political system play the most important role, both structural and procedural aspects are important in the latter. The following enumeration will begin with the structural factors. 5.2.1. Institutional embeddedness Many technologies, particularly those related to environmental protection, are subject to substantial political regulation determining which external effects a technology is allowed to exert and which (and how) others must be avoided. In this context, the close mutual relationship between the established technology and its regulatory environment tends to adversely influence the competitive position of any (radically) new competitor. An example for the self-stabilizing effect that needs to be overcome by a new technology is the reference many regulations make to the state of the art (related to the established technology) for solving an environmental problem. 5.2.2. Interest groups While it is a matter of political culture how influential corporate bodies or individual actors can be in principle, it depends on the specific circumstances which effects they actually give rise to. Basically, the power of an interest group is known to be crucially dependent on the size of the group, the homogeneity of its interests, its organization, and the resources it controls (Olson, 1965). Other important factors are the economic relevance of the industry or its history and cultural integration. Particularly in mature industries with strong market power, lobbying may pay even for single firms as investing in a useful regulatory environment is more profitable than investments in technological innovations (Berg, 1995)—with the corresponding stabilizing effect for the established technology. 5.2.3. Asymmetry of knowledge For the solution of environmental problems, governments and political administrations need external advice. As long as the problem has not attracted too much public attention, the necessary information is most convenient obtained from the industry that

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Table 1 Factors determining the stability or instability in each of the three subsystems and the indicators used for their operationalization

Effect

Indicators

Operationalization

average capitalization of industry

statistical data

identification of investment cycles political regulation

recurrent phase-shifted cycling of prices and investment cost of retro-fitting after regulation, delayed investment due to expectation of uncertain measures

pattern of interactions between production lines

number and relevance of interactions between the old (new) technology and the entire production network

Economies of scale Sunk costs

Techno-economic subsystem

Economies of scope Learning by doing Network externalities

Market structure

market share(s) of the competitor(s), availability of gateway technologies

need for compatibility with complementing infrastructure or periphery: • existence of public standards • availability of an adapter

which requirements are met? cost of the adapter, legal admission possible, payable royalties

degree of competition as a function of market concentration

market share of the biggest firm(s), Herfindahl index, legal regulations

riskiness ↔ availability of capital

marginal interest rate, capital share of venture capitalists technical properties (benchmarks), associated costs

Extra-demand

problem solving capacity ↔ realization of an innovation rent readiness to pay for extra-functions

market research

existence of natural niche markets

higher prices, non-applicability of the established technology

creation of artificial niche markets by means of regulation

(eco-)taxes, tradable certificates, cost of retro-fitting the old technology

subsidies protection norms and standards resources under control (power) structure; degree of homogeneity influence; earlier success

financial support, tax breaks duties, other barriers to trade specificity of specification number and economic importance of represented firms/sector market shares, concentration index (qualitative)

Asymmetry of knowledge

influence of industry in hearings number of industry-independent research institutions/projects

(qualitative) number, financial support, number and size of commissioned projects

Parliamentary majorities

stability of majorities

size of majority, stability of constituting coalition (number and relation of parties)

Election cycle

distance to the next election

ditto.

Singular constraints

political scandals

deception by possible interest holders

catastrophes

accidents, unexpected discoveries

probability of legislative initiatives

number and relevance of potential initiators, number of cases

legislative vs. administrative regulation

number of laws referring to ordinances, actual number of ordinances

Interest groups

Political subsystem

cost (or price) development as a function of cumulative output direct competition with (an)other network(s)

Potential / risk

Institutional embeddedness

Socio-cultural subsystem

cost (or price) development as a function of actual output

Decision-making procedures

reassessment and resubmission cycles

deadlines, frequency, possible consequences

corporate structure

number, size, and frequency of political involvement of corporate organizations

participation

frequency and extent of incorporation of political “outsiders” (e.g. NGOs) into the decision process

supranational structures

share of regulation that is not subject to national legislation

relevant publications in scientific literature, contributions to conferences

number of relevant articles (keyword search) in journals etc.; identification of seminal articles and quotation circles

Scientific confirmation of threat to sustainability

independence of research

sources and quantity of research sponsoring

Public concern about lack of sustainability

relevant articles in newspapers, reports in broadcast,

number of articles/reports over time

Public acceptance of possible solutions

formation of major protest campaigns

number and size of campaigns

Source: own compilation.

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caused the problem. According to the life cycle theory of bureaucracies, initially independent (regulatory) authorities will thus successively merge their interests with those of the established industry (Martimort, 1999). This bregulatory capture of bureaucraciesQ often leads to quick and at most half-hearted solutions related to the dominant technology. By contrast, more radical changes can only be expected, if the necessary knowledge comes from more independent sources— notably state-financed scientific research. 5.2.4. Parliamentary majorities Especially more radical changes are often not unanimously supported since the associated improvements go at the expense of the established regime. Even if its basic attitude would tend to render a government supportive of the corresponding change, its actual realization will ultimately depend on the strength and stability of the majority on which it can rely. From this perspective, a large, stable majority basically opens the potential for more radical changes than does a minute or unstable one. 5.2.5. Election cycle One of the most prominent stylized facts in political science states that more radical political changes usually occur at the beginning of an election period while incremental changes, if not political standstill, follow at the end (Troja, 1998). With regard to environmental innovations this implies a potential for a political window of opportunity in the post-election period. Unfortunately, empirical tests so far failed to confirm this effect of the election cycle (Horbach, 1992). A special popularity of environmental regulation, an eminent problem pressure or, like in Germany, the temporal alternation between state and federal elections could be reasons for this. 5.2.6. Singular constraints The costs and, thus, the scope of each regulatory measure is subject to a budget constraint. While the power of the interest groups behind technologies generally influences the allocation of governmental resources, it depends on the social appreciation of environmental protection or the reputation of the involved parties whether the incumbent industry can defend its subsidies or has to share it with its more sustainable competitors. In this respect, singular (i.e.

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exogenous) events like political scandals and environmental or other disaster can bring about sudden changes. 5.2.7. Decision-making procedures Since it is not possible here to extensively analyze the entire political decision-making process, just a few criteria will be presented that may allow for a basic characterization of the procedural aspects of a political system with regard to the stabilization or destabilization of a specific technology. (1) It is an important aspect of political culture whether the initiatives for regulatory acts typically come from single actors (e.g. president, members of parliament) or major bodies (government, parties, or the parliament). In general, the former tends to give rise to more radical (i.e. destabilizing) changes than those of the latter. (2) The relation between legislative bodies and executive administration determines whether a regulation is enacted by means of a law that has to pass a lengthy parliamentary approval procedure or whether this can be done by referring to an ordinance that is quickly adopted by the administration alone. (3) Obligatory reassessment and resubmission cycles ensure that any existing regulation does not lead to the stabilization of the respectively benefiting technology. (4) Participation of larger parts of the society (e.g. NGOs, public research institutes) in the search for more sustainable solutions will not only facilitate the search for knowledge but also increase and widen the support for (often more radical) solutions. (5) Finally, it is important how a country is incorporated into supranational structures (e.g. EU, WTO). While this limits a country’s possibility to implement innovations in an idiosyncratic manner, it broadens the scope and efficacy of many sustainable innovations. 5.3. Factors of change in the socio-cultural system Public attention to a (perceived) problem and subsequent worry about its potential consequences

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play a key role in provoking political reactions directed to solving the problem or, at least, alleviating its consequences. This is all the more true in the context of environmental protection since due to their longterm relevance and public-good nature, environmental problems and their solutions are rarely issues that allow a politician to derive major benefits for himself. While awareness and concern by a considerable part of the population is neither sufficient nor necessary for political action to be initiated, their lack will usually lead to a failure or, at least, major delay in acting accordingly. Mass media play an important role not only as transmitters for the corresponding information but also for the assignment of meaning and valuation to the underlying problem. The relation between the media and their readers, listeners, or watchers is characterized by mutual interaction giving rise to positive and negative reinforcement The scientific verification of an environmental problem, which often stays at the beginning of such an dissue attention cycleT (Downs, 1972), is identified through scanning the scientific literature for relevant keywords and trying to identify seminal publications through the tracing back of references. On the other hand, public concern about these problems can be measured to some extent by counting relevant articles in newspapers and reports in other mass media. Additionally, it may be necessary to account for the more qualitative aspects of concern and valuation, as the authors of relevant articles often differ in their basic attitude towards a given environmental problem. It is also important to realize that the attention of mass media to any given problem usually tends to decline more rapidly than the attention of the public in general. Table 1 summarizes the comprehensive list of determinants of periods of instability elaborated above including the corresponding indicators and their potential operationalization. 5.4. Windows of opportunity as periods of higher second-order sustainability In order to identify periods of greater or lesser second-order sustainability by means of these indicators, it needs to be pointed out first that sustainability correlates strongly with the instability

(= flexibility) of the established technological regime and the political and social conditions supporting it. So, second-order sustainability will be strongest when the window of opportunity is most widely open and it will be weak when the window is closed. In order to identify a window of opportunity, an aggregation of its determinants is necessary. Since the direct comparison of all these indicators on the basis of a common denominator (e.g. monetary value) is not possible, however, any comparison can in the end only be of qualitative nature. Therefore, the following scheme of aggregation is used to arrive at least at a relative measure of second-order sustainability. In the techno-economic sphere, all factors essentially work in parallel. High sunk costs add to the stability of the incumbent technology as well as does extended learning. Niche markets for the new technology on the other hand destabilize the incumbent technology. None of these factors relies on another one to become effective. So, even if one effect became zero, the other factors would remain unaffected. Their mode of aggregation is additive. By contrast, in the socio-cultural system, (scientific) verification of an environmental problem is a necessary (but not sufficient) prerequisite for the formation of public concern. Conversely, public concern alone sometimes is little effective until the exact causes for an environmental problem are scientifically verified and unless an acceptable solution exists. So, all factors work in sequence with the combined effect yielded by multiplying the constituents. In the political system, both effects are found. While structural and procedural factors in general appear to complement each other in a multiplicative way, the specific structural (or procedural) factors tend to work in parallel. With regard to the relationship between the entire systems, the political system not surprisingly is of central importance because in the end, it brings about the regulation necessary to achieve greater sustainability. However, the political system hardly works on its own; it needs impulses from the other systems: destabilizing impulses (for the existing regime) come from the society disapproving the lack of sustainability and from the new, more sustainable technological or institutional alternatives; opposite stabilizing impulses come from the incumbent indus-

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try that caused the environmental problem and the loss of sustainability in the first place. Fig. 1 summarizes how the composite indicator of sustainable technology development is constructed from its constituents.

6. Conclusion In particular radical innovations can be important means to the achievement of improved sustainability. Due to the existence of path dependencies, however, the transition from one technological trajectory to another, more sustainable one is often impeded by significant barriers. Fortunately, these barriers are by their nature subject to substantial changes; so, it makes sense to carefully distinguish between periods of stability (with high barriers) in which the given trajectory can hardly be left and periods of instability (characterized by low barriers) where a new trajectory can be reached more easily. With respect to sustainability, the latter distinction is particularly important for two reasons. First, more sustainable innovations often rely on governmental regulation. In periods of instability, the economic burden arising from this regulation will be much lower than in periods of stability; so, a given budget will yield a much better sustainability effect in the former case

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than in the latter. Second, due to the complexity and changes in their respective environments, innovations are generally associated with fundamental uncertainty such that it becomes impossible to predict the degree of sustainability resulting from specific innovations in the long run. Under these circumstances, it is essential to ensure flexibility including the possibility to select between a variety of different trajectories in a process of trial and error. Sustainability as viewed from this evolutionary perspective may therefore better be understood as the general capability to readily change between different technological trajectories. Since the latter kind of sustainability determines the conditions under which the former kind can be achieved, we call the two kinds first-order and second-order sustainability. In order to undergo successful diffusion, most sustainable innovations rely on regulatory measures especially in the beginning of their (economic) lifecycles. When looking for the factors determining periods of (in-)stability, the political system enacting this regulation therefore is of central interest. However, while basically allowing for the convergence of both technological progress and sustainability, the political system itself can neither give rise to the search for sustainability nor bring about the appropriate innovations in the first place. This is where the socio-cultural and, of course, the techno-economic sphere itself enter the focus of attention as emitters of positive impulses. Additionally, negative impulses like those coming from the incumbent industry need to be taken into account. After all, a series of factors (and corresponding indicators) could be identified which, after proper weighting and prioritization, allow to make an estimation whether, and possibly when, the incumbent industry is sufficiently destabilized and the political system rendered sufficiently favorable to the new, more sustainable technology such that a transition to the preferred trajectory is possible without the lowest effort possible.

Acknowledgement Fig. 1. Reconstruction of a measure of second-order sustainability from its constituent factors in the techno-economic, political, and socio-cultural sphere.

Funding of this research by the German Federal Ministry for Education and Research (grant

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