Utilities: Innovation and Sustainability

Abstract

Pro-market reforms have disrupted the playing field and strongly affected the innovative behavior of electricity, gas and water utilities. Beyond a significant reduction in sectoral R&D investments, very little is known about how these firms accomplish their innovation strategies in this new scenario. Given this gap in the literature, the first aim of this paper is to identify the internal determinants of both the product and process innovation of utilities in a liberalized environment. Additionally, there is another external force that is also disrupting the specific landscape of utilities: the sustainability challenge. Therefore, the second aim of this paper is establishing whether sustainability-orientation is a driver of innovation in the utilities industries. The empirical study is carried out on a panel of 82 Spanish electricity, gas and water utilities over the period 2005–2012 (Technological Innovation Panel dataset (PITEC)). The main findings are: (i) the acquisition of disembodied knowledge does not play a relevant role for utilities; (ii) non-formal search processes are central to product innovation; (iii) some markets for technology –external R&D and technology embedded in equipment—are determinant factors for process innovation; (iv) sustainability orientation increases the likelihood of generating both, product and process innovations. These firm-level results are novel contributions to the field of utility management.