STS - conferences, IST2012

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Transition governance failure in oligopolistic markets
Henning Wilts

Last modified: 2012-03-20

Abstract


Transition Management theory has enhanced the analytical understanding of emergence and evolution of radical innovations based on the co-evolution of socio-technical regimes, landscape and niches. Especially the structuration of regimes takes into account economic incentives structure e.g. in form of sunk costs in technical artefacts or investments in specific knowledge. Nevertheless the market structure – number of competitors, the level of competition between them - and its consequences on the development of niche processes have been a blind spot in most of the empirical studies. The relation between market structure and innovation has been intensively discussed in economic competition theory but so far widely neglected in the TM debate which in this way fails to explain relevant differences in niche dynamics of specific sectors.
This paper analyses the influence of oligopolic market structures with a focus on the regime-niche-interaction. It takes the example of the German waste management market which is characterized by the dominance of four international private companies holding more than 50% of the market and local monopoles of municipal waste companies. It analyzes effects on the causalities of niche developments, actor composition in the niches and their protection as well as on the radicalism of innovation. Based on the extensive analysis of six different innovation niches aiming at the prevention or high quality recycling of waste it can be shown that in oligopolies the analytical distinction between niche and regime gets fuzzy. Because the market entrance for external actors is extremely costly nearly all niches are either initiated by regime members or adapted by them in a very early stage of development. The regime is fully aware of inventions and often successfully tries to suppress them if they threat their business model. If the niche starts to gain momentum anyway the regime has sufficient resources to either copy or buy in the innovation. Regarding the waste sector the transition can be characterized more accurately by an ongoing “battle of the systems” instead of by a radical rupture in the regime, niches only react on occurring weaknesses in the system and fail to develop long term visions.
Based on these findings the paper discusses the special challenges for the different steps in strategic niche management processes in oligopolic markets, highlights the relation between market entrance costs and niche protection and ends with further need for research on the integration of competition theory into TM.