Catching-up in green industries: the role of product architecture

ABSTRACT

As latecomers to the industrialization process, developing countries may face barriers to upgrading from the production of mass-produced goods to higher-value technologies. Scholars have suggested that ‘windows of opportunity’ can temporarily lower entry barriers and provide an opportunity for latecomers to catch up to or even leapfrog incumbents. In this paper, we use the literature on product architecture to build on the concept of windows of opportunity. Specifically, we explore how changes in a technology’s use environment can create opportunities for indigenous innovation and upgrading in specific sub-systems or components of complex technologies. Using a comparative qualitative case study focusing on three renewable energy technologies, we develop a typology of catching-up opportunities in green energy industries. Our findings suggest that policymakers should target certain technologies in their industrial strategies based on certain technology characteristics, and should seek opportunities to capitalize on a local niche that creates a need for innovation.

KEYWORDS:

• Catching-up
• global value chain
• product innovation
• technology lifecycle
• modularity
• complex product system

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 In particular, we focus on SDG 9.B (‘support domestic technology development, research and innovation in developing countries, including by ensuring a conducive policy environment for, inter alia, industrial diversification and value addition to commodities’).

2 Modules are defined as technological sub-systems characterized by relative design independence across their boundaries, but high interdependence within their boundaries (Baldwin and Clark 2006; Cabigiosu, Zirpoli, and Camuffo 2013; Campagnolo and Camuffo 2010).

3 Interfaces are defined as a set of rules that establish the functional and design relationship between modules (Baldwin and Clark 2000).

4 It is important to note that modularity is a continuous characteristic ranging from completely modular to integral (Campagnolo and Camuffo 2010). Also note that modularity can be defined at multiple levels of analysis. Modularity at the subsystem level does not necessarily entail modularity at the component-level (Murmann and Frenken 2006).

5 Excludes traditional biomass energy (for heat), as well as biogas-based technology.

6 While this platform structure offers some modularity, the electrical and mechanical modules within a wind turbine typically interact at multiple levels of this hierarchy as defined by platform-specific design rules (Andersen 2004).

7 Recent examples include Argentina, Brazil, India, Egypt, Morocco, and South Africa

8 EPC companies are responsible for the engineering design; procurement of materials, equipment, and services; and construction of a project. For large infrastructure projects, they therefore are a key actor in project realization.

9 In particular, Chinese firms dominate the manufacturing of solar cells and panels, with the vast majority of their manufacturing facilities located in China (Nemet 2019; Zhang and Gallagher 2016).

10 Most turbines are upwind machines (i.e. the rotor faces the wind); to fully utilize the energy from the wind, the rotor must be yawed so it continuously faces the wind, and pitched to provide an optimum angle for the blades to rotate (Hau 2015).

11 In 2017, only four OEMs (Siemens, Vestas, Goldwind and GE) accounted for 54% of turbine sales (Efstathiou 2018).

12 In this paper, we focus on biomass feedstocks not suitable for human consumption, including agricultural residues, industrial waste, and forestry residues. Energy crops, or biomass grown explicitly for energy purposes, are not considered.

13 Following the successful implementation of competitive auctions in South Africa, these policies, which award contracts to renewable energy projects with the lowest price offer, are growing increasingly popular in emerging economies.

14 These extreme conditions are rarely found in onshore applications, but are more common for offshore wind which is thus far irrelevant in middle-income contexts and therefore not covered in this paper.

15 Transport restrictions such as viaduct heights or maximum turn radii can limit the size of turbine towers in certain markets.

16 Local content requirements for wind power in South Africa increased from 25% in auction rounds 1 & 2 of the REIPPP to 40% in rounds 3 & 4.

17 The higher ash content and lower ash melting temperature of these agricultural feedstocks often resulted in sintering of ash on the grate.

18 E.g., circulating fluidized bed or atmospheric fluidized bed designs