The renewable energy industry: competitive landscapes and entrepreneurial roles

Emerging societal needs are a source of pressure for the development of new technology (Arthur, 2009). Improvements in existing products and services very often are not sufficient to narrow the gap and consequently the search for an entirely new technology paradigm starts, and usually ends with the emergence of a new industry (Day, 2000). The speed and effectiveness of this process of replacement depends on the one hand on technological and scientific progress, and on efficacious business strategies on the other hand. If it is true to say that new technological paradigms are the outcome of the combination of old and new knowledge (Arthur, 2009), it is also true to say that firms, by means of entry strategy decisions (Ghemawat, 1991), can select and foster the production of such new knowledge (Nelson and Winter, 1982). Unfortunately entrants to the new industry have to bear considerable, high risks. The time the development of a new technology takes, the amount of investments required and the possibility of being surpassed by competing technology platforms, are just a few of the sources of risk. Investments in such a scenario, where development trajectories are unknown and unknowable (Zeckhauser, 2006), are usually limited and will tend to follow rules that are very different from standard financial models. If competitors move late and/or with incremental investments only, the new industry will develop very slowly. The complexity of interaction between the scientific and technological knowledge domain and the business rules domain can cripple the process, leading to a sense of frustration among the supporters of the new industry (UNEP, 2010). The renewable energy industry seems to fit exactly into this scenario. Despite the rising concern about the negative impact of global warming, fossil fuels still represent the dominant paradigm in the energy-producing field (IEA, 2010). The perspective of entry strategies into a new industry followed by competitors, either those already dominating related industries (incumbents), or those wishing to enter the field (newcomers), could shed light on the reason why new industry develops or fails to develop over time. Academic debate on the issue has a very long track record. According to the Schumpeterian line of thought (Schumpeter, 1934) the dominant paradigm of analysis is that new entrepreneurial ventures will be the vehicles introducing new technology onto the market, and in the long run will replace the old population of existing firms (incumbents) that have grown thanks to mature technologies (Hannan and Freeman, 1977). This approach has been questioned, and very recently, with specific regard to sustainable industry, it has been posited that a positive role for both young ‘Davids’ and well-established ‘Goliaths’ can feasibly exist (Hockerts and Wüstenhagen, 2010). In order to understand entrepreneurial roles (young ‘Davids’, and old ‘Goliaths’ capable of readapting to new scenarios) in innovative industries, such as that of renewable energy, the concept of entry strategies (and related issues) needs to be reflected upon and elaborated. By analysing recent changes in how competition is structured, the objective of the chapter is to explore issues relating to entry strategy paths of key players in the renewable energy sector in order to understand the entrepreneurial role in a new industry. The chapter proceeds as follows. The following section describes the renewable energy sector and clarifies the focus of the chapter. Next, we provide a review of existing literature on entry strategies in new industries and on ‘competitive landscapes’ structures, in order to define the theoretical frame of reference. After that, we specify our research methodology. Finally, we present the empirical research and the results and end with a discussion of the study’s limitations, implications and conclusions.