TOXIC INVENTIONS: GEO-TEMPORAL DYNAMICS AND FIRM LEVEL STRATEGIES IN THE CHEMICAL INDUSTRY

Industrialized economies have historically maintained the hope that the advances in science, technology and innovation would have offered to humanity a wide range of options to improve its well-being and attain sustained economic growth. The transition towards a high technological frontier arising from the rapid advances of science, technology and innovation has opened a debate on the relations between innovation-induced industrial activities, related possible social and environmental threats like climate change, resource depletion and emerging pollution-driven health crises and the role of regulation and government intervention to keep up with industry developments (Stilgoe, Owen, and Macnaghten 2013; Owen et al. 2009). While the potential of regulation and government intervention to shape firms’ innovative behaviour and related R&D activities toward socially desirable and environmentally acceptable outcomes has been widely acknowledged (Porter and Kramer 2006; Lanoie et al. 2011), the impact of regulations on potentially harmful technologies or innovations are produced is not well understood (Coad, Biggi, and Giuliani 2020). Our knowledge on the impacts of environmental regulations on potentially harmful products, processes or technologies is scant, which creates opportunities for research especially as environmental hazards and risks are currently receiving heightened media and policy attention. While pesticides like DDT or PBC appear to be a menace from the past, new chemical compounds are currently receiving considerable attention for their potential hazardous impacts. A case in point is glyphosate, a herbicide currently used especially in connection with genetically modified crops, which the WHO Agency for Research on Cancer (IARC) classified it as ‘probably carcinogenic’ in 2015 after numerous independent studies provided evidence of its connection to the emergence of different forms of cancers. Like glyphosate there are many other harmful innovations, or otherwise defined ‘contested technologies’, that are still in use despite evidence of their hazardous impacts on humans and the ecosystem. In a recent article, Coad, Biggi and Giuliani (2020) show that contested technologies sometimes take decades to be banned, which creates enough opportunity space for firms to extend the exploitation of their existing technologies, especially in loosely regulated countries, and despite their well-known hazards. Because of this lag and uncertainty regarding the ban of hazardous innovations, it seems timely to investigate the potential hazards enshrined in companies’ inventive phase. Knowing the potential toxicity of ongoing inventions, can help anticipate future hazards. In contemporary society we are chronically exposed to a mixture of chemicals, which, even at low doses, can be toxic for human health and the environment. In this context, I ask: what are companies doing in their R&D labs: are their inventions less toxic (and potentially less hazardous) over time? Are current environmental regulations effective in curbing corporate inventions of harmful products? From an evolutionary economics’ perspective, firms can search for technical novelty both by exploring new technological spaces and/or exploiting prior knowledge (March 1991). The balance depends on the relative costs of exploration and exploitation and the ability to apply prior expertise towards future paths. Explorative search is costly and risky, and the balance depends on the relative cost of exploration and exploitation. The idea of induced innovation (Hicks 1963) recognizes that R&D is a profit-motivated investment activity and that the direction of innovation likely corresponds positively to the direction of increased relative cost. Environmental regulation can spur explorative search reducing its relative cost. Some scholars indicate that environmental regulation can spur firms’ ability to innovate, by lowering its relative cost of exploration (Jaffe and Palmer 1997). That regulation can help direct towards new combinations of products or processes (Fleming and Sorenson 2004). Thus, environmental regulation is theorized as allowing firms to enlarge their innovative outcomes. In the chemical sector, environmental regulation can trigger the transformation process of existing chemical compounds and substances. In that context, my hypotheses suggest that, after a ban, companies and other inventing entities will take new 'explorative' innovation paths (March 1991) and therefore will make new knowledge around the regulated technologies. They also will potentially explore radically new technological trajectories (Dosi 1982). My results show that after a global ban to regulate POPs’ use, production and trade the number of new firms inventing around POP-related technologies, as well as a global spread of POP-related patent applications in developing countries, increased (Essay 1). I also find that environmental regulation had a significant effect on the number of patented compounds as well as in the number of newly invented compounds (Essay 2). Finally, building on computational chemistry techniques I introduce novel indicators for the toxicity prediction of chemical inventions by analysing POP-related technologies with a control group of unregulated technologies (Essay 3). Methodologically, my thesis is original for the following reasons. First, I build for the first time a dataset that combines patent data with chemical structures data. The approach follows extant methodologies (Hemphill and Sampat 2012) but my focus is more narrow on chemical compounds’ patent claims (Markush) which allows me to identify more neatly the innovative space for which companies seek intellectual property rights (IPR) protection. Second, I combine patent analysis with computational chemistry and toxicology, which is unprecedented in innovation and management studies (one of my articles using this proposed methodology received the nomination for the Aalto Business School ‘That’s interesting!’ Award during the 2020 Academy of International Business Annual Meeting). Computational chemistry is a chemistry branch which, combined with toxicology uses mathematical algorithms, statistics, and large databases to analyze and experiment chemical substances and related toxicological properties. Finally, this thesis’ work represents one of the first steps to uncover R&D labs activities and assess their potential hazards for humans and the environment, which has potentially significant implications on public policy, R&D management and firm strategy