Keywords: coevolution, eco-innovation, lock-in, network externalities
Eco-innovations and industrial organisation: a review of complementary explanations of unsustainable economic paths
Technological 'lock-in' is a form of macrolevel 'network' externality and thus a form of market failure. What it can imply is that firms in an industry maintain (and replace) capital stock which is technologically sub-optimal because of 'quasi-irreversibilities': it is only privately optimal for one firm to shift its technological base if other firms in the industry follow suit. This form of externality is radically different to the conventional microlevel pollution externality. This research explores the possibility that production is 'locked into' practices that are unsustainable and polluting due to macrolevel quasi-irreversibilities and due to the micro (firm) process of 'searching' for social and environmental innovations. As such, the research develops an evolutionary economic conceptual model of firm behaviour and considers the implications of this model for the long-term competitiveness and sustainability of industry.