The international economics of resources and resource ... - Index of

Competences for green development and leapfrogging 249
The economic rationale for pushing for sustainability innovations in order to
realize export potential is linked to the concepts of first mover advantages and lead
markets. A first-mover advantage requires that competition is driven not so much by
cost differentials and the resulting attractiveness of international production location
alone, but also by quality aspects. Empirical results indicate that under these
conditions, unit labor costs play a lower role in determining exports (Amable and
Verspagen 1995; Wakelin 1998). Above all for technology-intensive goods, which
include many environmental innovations, high market shares depend on the
innovation ability of a national economy and its early market presence. Thus, the
argument can be made that if countries push for increasing material efficiency, they
tend to specialize early in the supply of the necessary technologies. If there is a
subsequent expansion of the international demand for these technologies, these
countries are then in a position to dominate international competition due to their
early specialization in this field.
The following factors have to be taken into account when assessing the potential
of countries to become a lead market in a specific technology (Walz 2006):
& Lead market capability: it is not possible to reach a lead-market position for every
good or technology. One prerequisite is that competition is driven not by cost
differentials alone, but also by quality aspects. This prerequisite is fulfilled
especially for knowledge-intensive goods. Other important factors are intensive
user-producer relationships and a high level of implicit knowledge (Archibugi and
Michie 1998, Archibugi and Pietrobelli 2003; Dosi et al. 1990, Fagerberg 1995).
& The importance of the demand side is an important part of the analysis of von
Hippel (1986), Porter and van der Linde (1995) or Dosi et al. (1990). Beise
(2004) classifies the demand factors in 5 categories, distinguishing demand and
price advantage, market structure, and transfer and export advantage.
& A lead market situation must also be supported by regulation which at the same
time is innovation-friendly and sets the example for other countries to follow the
same regulatory path (Blind et al. 2004; Beise and Rennings 2005; Walz 2006,
2007). This relates to different aspects: First, for environmentally friendly
technologies, the demand depends very much on the extent by which regulation
leads to a correction of the market failures which consists in the externality of the
environmental problems (Rennings 2000). Without such regulation, the demand
will be much lower, and the various demand effects are less likely to be strong.
Second, the national regulation should not lead to an idiosyncratic innovation, in
other words an innovation that can be only applied under the very specific
national regulatory regime. In contrast, the regulation should be open to diverse
technical solutions, which increase the chance that they fit into the preferences of
importing countries. Third, the national regulation should set the standard for the
regulatory regime, which other countries are likely to adopt. Examples for this
are product standards or testing procedures, which have to be fulfilled before a
technology becomes classified as environmentally benign. If the procedure from
the lead country is adopted in other countries, the national suppliers from the
lead country have additional advantages on the world market, because they have
adapted their technologies early on to pass the requirements of such a regulatory
regime, and have developed administrative capabilities how to deal with all the