Ratio Working Paper No. 362: Interest groups and the failure of transformative innovation policy – Insights from the ethanol car bubble in Sweden 2003-2013

PublicationWorking paper

Christian Sandström

Ratio Working Paper No. 362 Ethanol Cars Paper Manuscript

Abstract

Literature on innovation policy has so far paid little attention to policy failure and the mechanisms leading to failure. We describe the Swedish bubble in ethanol cars 2003-2013 and explain why well intended policies may end up with unsatisfactory results. Directives from the European Union forced policymakers in Sweden to act swiftly and the Swedish government put in place The Pump law which forced gas stations to supply ethanol as a fuel from 2006 and onwards. In combination with targeted tax deductions for ethanol cars, a sharp increase in demand took place in 2006-2008. As these started to experience engine problems by 2009-2010, demand declined. Tax deductions were subsequently altered in order to also include cars with very low CO2 emissions, a shift that contributed further to the downfall of ethanol cars. Our data suggests that domestic car manufacturers Volvo and Saab, along with Ford benefited from the ethanol policies as their combined market share for green cars surged from 12 to 75 percent 2005-2008. Ethanol was competitive in the political domain as the fuel was backed by the Centre Party and the associated farmers’ lobby group, but lacked economic, technological and environmental competitiveness. Our findings suggest that innovation policies aimed at supporting new technologies against vested interests may instead end up extending established interests as policies are put in place under the influence of various stakeholders.

Björnemalm, R., & Sandström, C. (2023). Interest groups and the failure of transformative innovation policy: Insights from the ethanol car bubble in Sweden 2003-2013. Working paper No. 362. Stockholm: Ratio.

Abstract

Introducing the inverted Icarus paradox in business history – Evidence from David and Goliath in the Swedish telecommunications industry 1981–1990

Article (with peer review)Publication

Eriksson, K.; Lakomaa, E.; Nykvist, R.; Sandström, C.

Publication year

2024

Published in

Business History, Advance online publication.

Abstract

Previous research in business and management history has identified the Icarus paradox, which describes how organisations may fall due to overconfidence and hubris. We build upon previous research on paradoxes in business history and introduce the notion of an inverted Icarus paradox. Using rich archival sources coded in a relational database, we show how an entrant firm, Comvik, outmanoeuvred an established government monopoly in the non-market domain from 1980 to 1990, despite inferior resources and a weak market position. The government monopoly Televerket faced an inverted Icarus paradox; it could not leverage its strengths and political connections as they were stuck in a David versus Goliath narrative where public opinion was more sympathetic to the entrant firm Comvik.

Learning from Overrated Mission-Oriented Innovation Policies: Seven Takeaways

Book chapterPublication

Henrekson, M., Sandström, C., & Stenkula, M.

Publication year

2024

Published in

Springer Nature.

Abstract

This chapter integrates findings from several different case studies on mission-oriented innovation policies (MOIPs) and makes use of the existing literature to briefly describe three other missions: The War on Cancer, homeownership in the United States, and the Swedish Million Program. Together with the analyses in the other chapters of this volume, seven takeaways regarding mission-oriented innovation policies are developed and described: (1) wicked problems cannot be solved through missions, (2) politicians and government agencies are not exempt from self-interest, (3) MOIPs are subject to rent seeking and mission capture, (4) policymakers lack information to design MOIPs efficiently, (5) MOIPs distort competition, (6) government support programs distort incentives and result in moral hazard, and (7) MOIPs ignore opportunity costs. These seven takeaways are illustrated using the cases described in this chapter and elsewhere in this volume.

The state of the entrepreneurial state: Empirical evidence of mission-led innovation projects around the globe. In Moonshots and the New Industrial Policy (pp. 125–143)

Book chapterPublication

Batbaatar, M., Larsson, J. P., Sandström, C., & Wennberg, K.

Publication year

2024

Published in

In Moonshots and the New Industrial Policy (pp. 125–143). Springer.

Abstract

This chapter reviews theoretical rationales for mission-oriented innovation policy and provides an empirical overview of extant 28 papers and 49 cases on the topic. We synthetize varieties of mission formulations, actors involved, and characteristics of missions described as more or less failed or successful. Fifty-nine percent of the studied missions are still ongoing, 33 percent are considered successful, and 8 percent as failures. Sixty-seven percent of the studied missions have taken place in Europe, 24 percent in North America, and 8 percent in Asia. The majority of innovation projects referred to as missions do not fulfill the criteria defined by the OECD. Results suggest that missions related to technological or agricultural innovations are more often successful than broader types of missions aimed at social or ecological challenges. Challenges regarding the governance and evaluation of missions remain unresolved in the literature. We find no case that contains a cost-benefit analysis or takes opportunity cost into account.

Ratio Working Paper No. 362 Ethanol Cars Paper Manuscript

Abstract

Ratio Working Paper No. 362 Ethanol Cars Paper Manuscript

Abstract

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