The innovation effects of environmental policies : linking policies, companies and innovations in the Nordic pulp and paper industry

The importance of technological innovations providing environmental benefits has been highlighted increasingly in political and scientific discussions, and there is a practical need to analyse how environmental policies promote these innovations. The effects of environmental policies on innovations have been studied before, but the literature provides partly inconsistent and context specific results. It rarely goes deeper into analysing the implications of the context. Thus this thesis analyses the innovation effects of environmental policies by examining both policy and company levels. The research examines the mechanisms through which environmental policies affect innovations, and how variation within and between organisations responding to policies influences the policy effects. The thesis endeavours to explain how the context surrounding policies and innovations varies in the Nordic pulp and paper industry, and why environmental policies sometimes fail to support innovation. To achieve these objectives, a perspective combining policy, technology, and organisation and management studies is adopted. The policy effects are studied as one among many determinants influencing innovation processes, following the idea of the innovation systems literature. The main empirical material comprises twelve cases of technological innovations and inventions, both processes and products, in the Nordic pulp and paper industry. The cases are complemented by an analysis of how environmental considerations are integrated into product development in four large paper and packaging companies, and by one policy case examining the integration of environmental considerations into Finnish technology policies. The pulp and paper sector is characterised by fairly significant achievements in environmental process innovation, developed in networks of public and private organisations, often in response to environmental policy. By contrast, environmental product innovations and the focus of environmental policies on products have been rarer. The findings of the thesis show that the ways in which environmental policies influence innovations can be divided into six categories: responsive effect, anticipatory effect, two-way effect, indirect effect, negative effect and no influence. Variations in how environmental policies affect innovations are explained by the heterogeneity of public policy, the variety of ways in which organisations respond to environmental policies, and changes and inertia in market conditions and technological systems. The organisational dimension is important from the perspectives of environmental policies and innovation. While the target groups of environmental policies are often well defined, the different types of organisations and organisational networks engaging in innovation processes are seldom fully acknowledged by environmental policymakers. This is partly because innovation has rarely been an explicit goal of environmental policies. Even within the defined target group of a specific policy, the differing structures and cultures of seemingly similar companies influence their responses to policies and their innovation capabilities. In large companies, functional disintegration between those following developments in environmental policy and those developing new products may hinder the diffusion of policy signals. Thus, a policy may simply fail to induce innovations because its effects are actually dependent on a complicated route from policy to outcome with a multitude of cause-effect points. The study emphasises the importance of acknowledging organisational variation in policy studie