Abstract
To achieve the transition toward a green economy, policy makers are required to redirect abundant financial resources into green tech innovations. Theoretically, policy makers have a menu of options ranging from technology-push support in the invention stage to market-pull mechanisms supporting the commercialization and diffusion of green technologies. This chapter proposes a mix of policies to mobilize early-stage finance for green technologies. To develop this policy package, we considered the menu of available policies from an investor’s and entrepreneur’s point of view. Based on a series of interviews and a survey with entrepreneurs and investors in Sweden and the Netherlands, we conclude that their preferred policy mix would include measures that fit the nature of innovation and overcome the disadvantages of green tech while also addressing barriers to the early-stage investment process in general, such as labor-market rules, intellectual property policy and tax treatment of early-stage investments.
This is a preview of subscription content, log in via an institution to check access.
Notes
- 1.
Creative destruction (or discontinuities) refers to process by which novel combinations of inputs lead to product, process or organizational innovation that radically change industries.
- 2.
Up to the point that other countries have accused the Netherlands of being a tax haven and allowing large corporates to channel their profits through the Netherlands largely untaxed.
References
Acemoglu, D., Aghion, P., Bursztyn, L., & Hemous, D. (2012). The environment and directed technical change. American Economic Review, 102(1), 131–166. https://doi.org/10.1257/aer.102.1.131
Adenfelt, M., Sanders, M., & Stavlöt, U. (2013). Mobilising private funds for the transition to a sustainable economy. Brussels: European Liberal Forum. Retrieved from http://fores.se/wp-content/uploads/2014/05/ELF_2013_final.pdf
Adenfelt, M., Sanders, M., & Stavlöt, U. (2014). Digging for gold in the green economy: Private investment in green venturing. Brussels: European Liberal Forum. Retrieved from http://www.liberalforum.eu/en/publications.html?file=tl_files%2Fuserdata%2Fdownloads%2Fpublications%2F2014%2FDigging_gold_green_economy.pdf
Barradale, M. J. (2010). Impact of public policy uncertainty on renewable energy investment: Wind power and the production tax credit. Energy Policy, 38(12), 7698–7709. https://doi.org/10.1016/j.enpol.2010.08.021
Bertoni, F., D’Adda, D., & Grilli, L. (2015). Cherry-picking or frog-kissing? A theoretical analysis of how investors select entrepreneurial ventures in thin venture capital markets. Small Business Economics, 46(3), 391–405. https://doi.org/10.1007/s11187-015-9690-9
Block, J., & Sandner, P. (2009). What is the effect of the financial crisis on venture capital financing? Empirical evidence from US internet start-ups. Venture Capital: An International Journal of Entrepreneurial Finance, 11(4), 295–309. https://doi.org/10.1080/13691060903184803
Bocken, N. M. P. (2015). Sustainable venture capital – Catalyst for sustainable start-up success? Journal of Cleaner Production, 108(Part A), 647–658. https://doi.org/10.1016/j.jclepro.2015.05.079
Bottazzi, L., & Rin, M. D. (2002). Venture capital in Europe and the financing of innovative companies. Economic Policy, 17(34), 229–270. https://doi.org/10.1111/1468-0327.00088
Bürer, M. J., & Wüstenhagen, R. (2009). Which renewable energy policy is a venture capitalist’s best friend? Empirical evidence from a survey of international cleantech investors. Energy Policy, 37, 4997–5006. https://doi.org/10.1016/j.enpol.2009.06.071
Cowling, M., Liu, W., Minniti, M., & Zhang, N. (2016). UK credit and discouragement during the GFC. Small Business Economics, 47(4), 1049–1074. https://doi.org/10.1007/s11187-016-9745-6
Creswell, J. W., & Clark, V. L. P. (2010). Designing and conducting mixed methods research. Thousand Oaks: SAGE.
Criscuolo, C., & Menon, C. (2015). Environmental policies and risk finance in the green sector: Cross-country evidence. Energy Policy, 83, 38–56. https://doi.org/10.1016/j.enpol.2015.03.023
Cumming, D. (2011). Public policy and the creation of active venture capital markets. Venture Capital, 13(1), 75–94. https://doi.org/10.1080/13691066.2010.492989
Da Rin, M., Nicodano, G., & Sembenelli, A. (2006). Public policy and the creation of active venture capital markets. Journal of Public Economics, 90(8–9), 1699–1723. https://doi.org/10.1016/j.jpubeco.2005.09.013
Demirel, P., & Parris, S. (2015). Access to finance for innovators in the UK’s environmental sector. Technology Analysis & Strategic Management, 27(7), 782–808. https://doi.org/10.1080/09537325.2015.1019849
Dosi, G. (1990). Finance, innovation and industrial change. Journal of Economic Behavior & Organization, 13(3), 299–319. https://doi.org/10.1016/0167-2681(90)90003-V
Edquist, C., & Zabala-Iturriagagoitia, J. M. (2012). Public procurement for innovation as mission-oriented innovation policy. Research Policy, 41(10), 1757–1769. https://doi.org/10.1016/j.respol.2012.04.022
Fischer, C., & Newell, R. G. (2008). Environmental and technology policies for climate mitigation. Journal of Environmental Economics and Management, 55(2), 142–162. https://doi.org/10.1016/j.jeem.2007.11.001
Foxon, T. J., & Pearson, P. (2008). Overcoming barriers to innovation and diffusion of cleaner technologies: Some features of a sustainable innovation policy regime. Journal of Cleaner Production, 16(1), 148–161. https://doi.org/10.1016/j.jclepro.2007.10.011
Franke, N., Gruber, M., Harhoff, D., & Henkel, J. (2006). What you are is what you like—Similarity biases in venture capitalists’ evaluations of start-up teams. Journal of Business Venturing, 21(6), 802–826.
Fricke, D. (2016). Has the banking system become more homogeneous? Evidence from banks’ loan portfolios. Economics Letters, 142, 45–48. https://doi.org/10.1016/j.econlet.2016.02.024
Georgallis, P. (Panikos), & Durand, R. (2017). Achieving high growth in policy-dependent industries: Differences between startups and corporate-backed ventures. Long Range Planning, 50(4), 487–500. https://doi.org/10.1016/j.lrp.2016.06.005
Ghosh, S., & Nanda, R. (2010). Venture capital investment in the clean energy sector (SSRN Scholarly Paper No. ID 1669445). Rochester: Social Science Research Network. Retrieved from http://papers.ssrn.com/abstract=1669445
Gompers, P. A., & Lerner, J. (2001). The venture capital revolution. The Journal of Economic Perspectives, 15(2), 145–168.
Haley, U. C. V., & Schuler, D. A. (2011). Government policy and firm strategy in the solar photovoltaic industry. California Management Review, 54(1), 17–38. https://doi.org/10.1525/cmr.2011.54.1.17
Henriot, A. (2013). Financing investment in the European electricity transmission network: Consequences on long-term sustainability of the TSOs financial structure. Energy Policy, 62, 821–829. https://doi.org/10.1016/j.enpol.2013.07.011
Hockerts, K., & Wüstenhagen, R. (2010). Greening Goliaths versus emerging Davids – Theorizing about the role of incumbents and new entrants in sustainable entrepreneurship. Journal of Business Venturing, 25(5), 481–492. https://doi.org/10.1016/j.jbusvent.2009.07.005
Hoppmann, J., Peters, M., Schneider, M., & Hoffmann, V. H. (2013). The two faces of market support—How deployment policies affect technological exploration and exploitation in the solar photovoltaic industry. Research Policy, 42(4), 989–1003. https://doi.org/10.1016/j.respol.2013.01.002
IEA. (2016). World energy investment outlook. Paris: International Energy Agency. Retrieved from https://www.iea.org/newsroom/news/2016/september/world-energy-investment-2016.html
Iyer, G., Hultman, N., Eom, J., McJeon, H., Patel, P., & Clarke, L. (2015). Diffusion of low-carbon technologies and the feasibility of long-term climate targets. Technological Forecasting and Social Change, 90(Part A), 103–118. https://doi.org/10.1016/j.techfore.2013.08.025
Jaffe, A. B., & Lerner, J. (2011). Innovation and its discontents: How our broken patent system is endangering innovation and progress, and what to do about it. Princeton: Princeton University Press.
Jefferson, M. (2008). Accelerating the transition to sustainable energy systems. Energy Policy, 36(11), 4116–4125. https://doi.org/10.1016/j.enpol.2008.06.020
Jick, T. D. (1979). Mixing qualitative and quantitative methods: Triangulation in action. Administrative Science Quarterly, 24(4), 602–611. https://doi.org/10.2307/2392366
Kenney, M., & Hargadon, A. (2012). Misguided policy? California Management Review, 54(2), 118–139. https://doi.org/10.1525/cmr.2012.54.2.118
Kenney, M., & Hargadon, A. (2014). Venture capital and clean technology. In M. Huberty & J. Zysman (Eds.), Can green sustain growth? From the rhetoric to the reality of sustainable prosperity. Stanford: Stanford University Press.
Keuschnigg, C., & Nielsen, S. B. (2003). Tax policy, venture capital, and entrepreneurship. Journal of Public Economics, 87(1), 175–203. https://doi.org/10.1016/S0047-2727(01)00170-0
Keuschnigg, C., & Nielsen, S. B. (2006). Public policy, start-up entrepreneurship and the market for venture capital. In S. Parker (Ed.), The life cycle of entrepreneurial ventures, International handbook series on entrepreneurship (Vol. 3, pp. 227–257). New York: Springer.
Lerner, J. (2002). When bureaucrats meet entrepreneurs: The design of effective ‘public venture capital’ programmes. The Economic Journal, 112(477), F73–F84. https://doi.org/10.1111/1468-0297.00684
Lerner, J. (2009). Boulevard of broken dreams: Why public efforts to boost entrepreneurship and venture capital have failed – And what to do about it. Princeton: Princeton University Press.
Lerner, J. (2010). The future of public efforts to boost entrepreneurship and venture capital. Small Business Economics, 35(3), 255–264. https://doi.org/10.1007/s11187-010-9298-z
Lerner, J., & Tåg, J. (2013). Institutions and venture capital. Industrial and Corporate Change, 22(1), 153–182. https://doi.org/10.1093/icc/dts050
Marcus, A., Malen, J., & Ellis, S. (2013). The promise and pitfalls of venture capital as an asset class for clean energy investment research questions for organization and natural environment scholars. Organization & Environment, 26(1), 31–60. https://doi.org/10.1177/1086026612474956
Mathews, J. A., Kidney, S., Mallon, K., & Hughes, M. (2010). Mobilizing private finance to drive an energy industrial revolution. Energy Policy, 38(7), 3263–3265. https://doi.org/10.1016/j.enpol.2010.02.030
Mazzucato, M. (2013a). Financing innovation: Creative destruction vs. destructive creation. Industrial and Corporate Change, 22(4), 851–867.
Mazzucato, M. (2013b). The entrepreneurial state: Debunking public vs. private sector myths. London: Anthem Press.
Mazzucato, M. (2016). From market fixing to market-creating: A new framework for innovation policy. Industry and Innovation, 23(2), 140–156. https://doi.org/10.1080/13662716.2016.1146124
Mazzucato, M., & Penna, C. (2016). Beyond market failures: The market creating and shaping role of state investment banks. Journal of Economic Policy Reform, 19 (4), 305–326.
Migendt, M., Polzin, F., Schock, F., Täube, F. A., & von Flotow, P. (2017). Beyond venture capital: An exploratory study of the finance-innovation-policy nexus in cleantech. Industrial and Corporate Change. https://doi.org/10.1093/icc/dtx014
Moran-Ellis, J., Alexander, V. D., Cronin, A., Dickinson, M., Fielding, J., Sleney, J., & Thomas, H. (2006). Triangulation and integration: Processes, claims and implications. Qualitative Research, 6(1), 45–59. https://doi.org/10.1177/1468794106058870
Negro, S. O., Alkemade, F., & Hekkert, M. P. (2012). Why does renewable energy diffuse so slowly? A review of innovation system problems. Renewable and Sustainable Energy Reviews, 16(6), 3836–3846. https://doi.org/10.1016/j.rser.2012.03.043
New Climate Economy. (2014). Better growth better climate – Charting a new path for low-carbon growth and a safer climate. Washington, DC: World Resources Institute. Retrieved from http://newclimateeconomy.report/
Nightingale, P., Murray, G., Cowling, M., Baden-Fuller, C., Mason, C., Siepel, J., et al. (2009). From funding gaps to thin markets: UK government support for early-stage venture capital. London: Nesta.
O’Sullivan, M. (2006). Finance and innovation. In J. Fagerberg, D. C. Mowery, & R. R. Nelson (Eds.), The Oxford handbook of innovation (pp. 240–265). Oxford: Oxford University Press.
Olmos, L., Ruester, S., & Liong, S.-J. (2012). On the selection of financing instruments to push the development of new technologies: Application to clean energy technologies. Energy Policy, 43, 252–266. https://doi.org/10.1016/j.enpol.2012.01.001
Patton, M. Q. (2002). Qualitative research and evaluation methods. Thousand Oaks: SAGE.
Perez, C. (2002). Technological revolutions and financial capital: The dynamics of bubbles and golden ages. Cheltenham: Edward Elgar Publishing.
Perez, C. (2013). Unleashing a golden age after the financial collapse: Drawing lessons from history. Environmental Innovation and Societal Transitions, 6, 9–23. https://doi.org/10.1016/j.eist.2012.12.004
Polzin, F. (2017). Mobilizing private finance for low-carbon innovation – A systematic review of barriers and solutions. Renewable and Sustainable Energy Reviews, 77, 525–535. https://doi.org/10.1016/j.rser.2017.04.007
Polzin, F., Migendt, M., Täube, F. A., & von Flotow, P. (2015). Public policy influence on renewable energy investments—A panel data study across OECD countries. Energy Policy, 80, 98–111. https://doi.org/10.1016/j.enpol.2015.01.026
Polzin, F., von Flotow, P., & Klerkx, L. (2016). Addressing barriers to eco-innovation: Exploring the finance mobilisation functions of institutional innovation intermediaries. Technological Forecasting and Social Change, 103, 34–46. https://doi.org/10.1016/j.techfore.2015.10.001
Polzin, F., Sanders, M., & Täube, F. (2017a). A diverse and resilient financial system for investments in the energy transition. Current Opinion in Environmental Sustainability, 28, 24–32. https://doi.org/10.1016/j.cosust.2017.07.004
Polzin, F., Sanders, M., & Stavlöt, U. (2017b). Do investors and entrepreneurs match? – Evidence from The Netherlands and Sweden. Technological Forecasting and Social Change. https://doi.org/10.1016/j.techfore.2017.07.016
Porter, M. E. (1991). Towards a dynamic theory of strategy. Strategic Management Journal, 12, 95–117.
Porter, M. E., & van der Linde, C. (1995). Green and competitive: Ending the stalemate. Harvard Business Review, 73(5), 120–134.
Rogge, K. S., & Reichardt, K. (2016). Policy mixes for sustainability transitions: An extended concept and framework for analysis. Research Policy, 45(8), 1620–1635. https://doi.org/10.1016/j.respol.2016.04.004
Ruef, M., Aldrich, H. E., & Carter, N. M. (2003). The structure of founding teams: Homophily, strong ties, and isolation among U.S. entrepreneurs. American Sociological Review, 68(2), 195–222. https://doi.org/10.2307/1519766
Schumpeter, J. A. (1934). The theory of economic development. Boston: Harvard University Press.
Seawright, J., & Gerring, J. (2008). Case selection techniques in case study research. Political Research Quarterly, 61(2), 294–308.https://doi.org/10.1177/1065912907313077
Shepherd, D. A., & Patzelt, H. (2011). The new field of sustainable entrepreneurship: Studying entrepreneurial action linking ‘what is to be sustained’ with ‘what is to be developed’. Entrepreneurship Theory and Practice, 35(1), 137–163. https://doi.org/10.1111/j.1540-6520.2010.00426.x
Szabó, S., & Jäger-Waldau, A. (2008). More competition: Threat or chance for financing renewable electricity? Energy Policy, 36(4), 1436–1447. https://doi.org/10.1016/j.enpol.2007.12.020
Tan, N. (2016). Global Pension Assets Study 2016. London: Willis Towers Watson. Retrieved from https://www.willistowerswatson.com/DownloadMedia.aspx?media=%7B9FF7A5FA-C2E8-419F-9A80-149DFDE03218%7D
Veugelers, R. (2012). Which policy instruments to induce clean innovating? Research Policy, 41(10), 1770–1778. https://doi.org/10.1016/j.respol.2012.06.012
Weber, K. M., & Rohracher, H. (2012). Legitimizing research, technology and innovation policies for transformative change: Combining insights from innovation systems and multi-level perspective in a comprehensive ‘failures’ framework. Research Policy, 41(6), 1037–1047. https://doi.org/10.1016/j.respol.2011.10.015
Wüstenhagen, R., & Menichetti, E. (2012). Strategic choices for renewable energy investment: Conceptual framework and opportunities for further research. Energy Policy, 40, 1–10. https://doi.org/10.1016/j.enpol.2011.06.050
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2018 The Author(s)
About this chapter
Cite this chapter
Polzin, F., Sanders, M., Stavlöt, U. (2018). Mobilizing Early-Stage Investments for an Innovation-Led Sustainability Transition. In: Walker, T., Kibsey, S.D., Crichton, R. (eds) Designing a Sustainable Financial System. Palgrave Studies in Sustainable Business In Association with Future Earth. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-66387-6_13
Download citation
DOI: https://doi.org/10.1007/978-3-319-66387-6_13
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-319-66386-9
Online ISBN: 978-3-319-66387-6
eBook Packages: Business and ManagementBusiness and Management (R0)