Grand societal challenges and the reorientation of incumbent industries:

A dialectic issue life cycle model and examples

Prof. Frank GeelsSPRU, Univ. of Sussex

(sustainable practices workshop, 26-27 Jan. 2012)

Structure

1. Introduction/motivation2. Theoretical framework3. Case study 14. Case study 25. Conclusions

1. Introduction

Why at this workshop?• NOT about consumption practices

• But it is about:- “problems such as climate change” Issue life cycles (the dynamics of

problems)

- Political economy much talk in transitions literature about power and politics, but remains vague (often rather discursive)

- “Questions of the interaction between political and regulatory frameworks”. And industry/technical innovation, markets and civil society/discourse.

Background (innovation studies)

• New topic: Grand societal challenges (climate change, energy security, transport and resource efficiency, food safety, obesity, health and aging)

• Linked to: Systemic transitions + directionality of innovation (rather than speed and output)

• Focal actor: Industry (population of firms)

• Embedded in organizational field (link to my previous work)

Organizational fieldS up p ly ch ain : * m a te r ia l su p lie r s * co m p o n e n t su p p lie r s * m a c h in e s u p p lie rs

U sers

P ro duc tion ,indu stry :* f irm s* e n g in ee r s , d e s ig n e r s

R esearch :* u n iv e rs itie s* te c h n ic a l in s ti tu te s* R & D la b o ra to r ie s

P o licy, pub lic au tho ritie s :* E u ro p e a n C o m m is s io n , W T O , G AT T* G o v e rn m e n t , M in is tr ie s , P a r lia m e n t* L o c a l a u th o ri tie s a n d e x e c u t iv e b ra n c h e s

S oc ieta l g ro ups:(e .g . G re e n p e a c e ,m e d ia , b ran c ho rg a n is a tio n s)

Research questions

Lock-in, inertia, path dependence

1.How do societal problems emerge and develop?

2.How do industries respond to societal problems? When do they implement substantial responses (i.e. overcome lock-in)?

Research strategy

• Develop an enriched issue life cycle model

• Confront the model with in-depth case studies:

US car industry and:a) Local air pollution (1945-1985)b) Car safety (1910-2000)c) Climate change (1990-2010)

2. Theoretical frameworkIssue life cycle theory (Business & Society)

Public attention Dramatic

event ortrigger

Voluntaryor governmentmandatedresolution

Secondarytrigger

C

B

A

Expectationalgap(s) hasopened

Debate; coalitionsdevelop possibleredefinitions of the gap/issue

Implementation;monitoring by most interestedparties

A = The issue re-emerges because the resolution is not satisfactory or new issues emerge from the resolutionB = The issue is satisfactorily resolved as long as the resolution mechanism remains in place.C = The issue dies because of further social, economic, political, or technological change.

Mahon and Waddock (1992)

Tombari (1984)

Rivoli and Waddock (2010)

Strengths

• Issues/problems have temporality• Issue dynamics are socially enacted• Social construction + power/politics• Multi-dimensional: a) Activists/social movementsb) Public opinionc) Political debatesd) Political decisions (+ implementation)

Weaknesses

1. Too little conflict/struggle (teleological unfolding)

2. Too little corporate strategies

3. Linear sequence (problem in many phase-models)

Improvements

1) Link to broader industry framework

2) Add more strategy and struggle/conflict

3) Flexible with phases: backwards, forwards

Triple embeddedness framework of industry Inspired by:• institit. theory: org. fields • Structuration theory (‘rules and resources’)• Regulation theory (mode of production, regime of accumulation, mode of regulation)• Scott’s (1993) institutional pillars• Evolutionary theory: adapting to selection pressures

Industry

SuppliersPolitics

Customers

Civil society,social movements,public opinion

Industry regime

Institutional environment

Task environment

Knowledge, capabilities(technical regime)

Mission,behavioural norms

RegulationsBeliefs, interpretations

Firms

Framing, PR and issue management strategies

• Ignore, deny, downplay problems• Emphasize uncertainties and contest the science• Emphasize costs and difficulties of solutions

Adjust storylines to increase (Benford and Snow, 2000):

• Actor credibility• Empirical fit• Centrality• Experiential commensurability• Macro-cultural resonance

Corporate political strategies (Hillman and Hitt, 1999)

1. Information and framing strategy - industry research institutes to build expertise- contest the science- commission research reports- testify as expert witness in hearings

2. Financial incentives strategy - make contributions to political parties- pay fees to politicians for speeches- offer politicians lucrative jobs at the end of their career

3. Organized pressure strategy - create fake grassroots organizations (‘astroturf’)- create industry associations that speak for the industry- mobilize employees, suppliers, customers to pressure their representatives

4. Direct lobbying strategy - hire lobbyists to work politicians- mobilize CEOs to speak with politicians

5. Confrontational strategies - oppose laws through litigation- threaten policy makers with plant closures- refuse to implement or obey policies

Economic positioning strategies

• Porter: low cost, high performance, niche market

• Supply chain management, marketing strategies

• Corporate strategy/mission

Innovation strategies

Tension: Radical and incremental innovation• Exploitation-exploration (March, 1991)

• Ambidextrous organizations (Tushman)

Radical innovation not just about knowledge flows (innovation systems),

But also about beliefs and strategic commitment

Rothwell (1992)

Tactical factors Strategic factors

Effective linkages with external sources of know-how

Top management commitment to, and visible support for, innovation

Effective functional integration; involving all departments in the project from its earliest stages

Long-term corporate strategy in which innovation plays a key role

Careful planning and project control procedures

Long-term commitment to major projects.

Temporal unfolding of pressures and responses (ideal-type)

Phase 1: Problem definition and framing struggles

Phase 2: Rising public concerns and defensive industry responses

Phase 3: Political debates/struggles and defensive hedging

Phase 4: Political regulations and diversification

Phase 5: Spillovers to task environment and reorientation

Different issue cycles

27

3. Longitudinal case study: Air pollution, technical innovation, and the American car industry (1943-1985)

Source: University of Southern California Digital Library and Los Angeles Times photographic archive, UCLA Library

Phase 1: Issue emergence and sensemaking attempts (1943-1953)

Pressures:• Severe smog events in California (1943, 1948)

• Public concerns and protests

Smog protestants at Board of Supervisors, 1947

Sour

ce: U

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rsity

of S

outh

ern

Calif

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a D

igita

l Lib

rary

• Symbolic policy statements (concern)

Smog committee at District Attorney's Office, 1947

Sour

ce: U

nive

rsity

of S

outh

ern

Calif

orni

a D

igita

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rary

• Research into causes (sensemaking struggles)• Initial blame to stationary sources (oil and waste burning)• Haagen-Smit research: car exhausts + smog chemistry

Smoking stack from Mercer Hotel, LA, 1949

Sour

ce: U

nive

rsity

of S

outh

ern

Calif

orni

a D

igita

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rary

Car industry responses:• Unconcerned• Rejected automobile as cause

Phase 2: Policy learning and defensive industry responses (1953-1960)

Pressures:• 1953 ‘five-day siege of smog’ increased public concern

• Activist movement: Stamp out Smog (1958)

Stamp Out Smog meets with public officials

Sour

ce: J

acob

s an

d Ke

lly (2

008:

192)

• Policy debates and early Federal involvement

• Federal Air Pollution Control Act (1955) stimulated further studies on the causes and (health) effects of air pollution

• First National Conference on Air Pollution in 1958

Car industry responses

• Industry acknowledges the issue (denial impossible)

• Framing strategies:a) Science base uncertainb) California is special case (no federal involvement needed)

• Incremental R&D programme by Vehicle Combustion Products Committee (1953)

• But also collusion: agree not to compete

Phase 3: Increasing public concern, early legislation and industry delay (1960-1970)

Pressures•Growing scientific understanding of health effects•New framing in public discourse• Increasing anxiety

Health risk framing of air pollution in the early 1960s

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ce: W

ashi

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n St

ar, r

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ted

in U

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•Smog problems spread to other states (New York, Philadelphia)

•New activist groups: Clean Air Council (1967) and the Group Against Smog and Pollution (GASP) (1969)

•Coalition with medical establishment

•Californian legislation: Motor Vehicle Pollution Control Act (1960)

•1963 Clean Air Act (CAA): weak, no standards, but do more research

Decreasing legitimacy of car industry:1) ‘anti-trust case of the century’ (1969):

conspiracy re. pollution control devices2) Secret recall campaigns: 20% of cars recalled for

safety defects between 1960 and 19663) Safety issue: Nader (1965) and regulations (1967)

Public perception: car industry noregard for public interest. Needs to be forced by law

Ralph Nader’s Unsafe at any speed

Sour

ce: S

cann

ed c

over

of t

he b

ook

Car industry responsesFraming strategies: • ‘regulation is not needed’ (Voluntary’ installation of

devices in 1960)•Solutions are expensive(mocked in newspapers)

Cartoon mocking the reluctance of the car industry to install control devices

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ce: W

ashi

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n Po

st, r

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ted

in U

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Incremental innovation strategies• PCV valves• evaporation-control systems (ECS)• transmission controlled spark (TCS)• thermovacuum switches (TVS)• air injected reactor (AIR)

Radical innovation strategies• Suppliers (chemical industry) offer catalytic converters• Industry rejects, but starts R&D

Phase 4: Tough legislation and resisted implementation (1970-1977)

Pressures• Peak in public attention

• Air pollution resonates with broader cultural trend of environmentalism (Earth Day, 1970)

Earth Day One (April 22nd, 1970)

Sour

ce: G

etty

imag

es

• Increasing frustration with car industry• Political jockeying Muskie and Nixon

Result in tough Clean Air Act (1970)

Figure 7: Number of air pollution control bills introduced

Car industry responses

Framing strategies• CAA is threat to US economy (imposes costs)• Emphasise trade-offs with fuel efficiency (1973)

Political strategies• Lobby senators to kill the bill• Complain directly to President• Litigation tactics to fight CAA implementation

Innovation strategies• Continue incremental innovation• But also improve catalysts Innovation race (patents)

• GM breaks industry front and installs catalytic converters (1975)

• Advertising GM’s 1975 add of catalytic convertersSo

urce

: Goo

gle

New

s Ar

chiv

es

Phase 5: Industry fightback, implementation delays, and institutionalization (1977-1985)

Pressures• Decline in public attention• Postponement of 1977 standards• Other issues: oil crises, economic problems (late

1970s), unemployment• Policy makers more interested in saving car

industry than air pollution• New anti-regulation discourse (causing economic

problems)• Reagan (1981) attempts regulatory rollback

Car industry responses

Economic problems (weak demand + Japanese competition)

• Economic problems embolden industry: refusal to comply with 1978 standards

• Industry supports anti-regulation discourse• Ask policymakers for support

Innovation strategies• Slowing down patent race• But install three-way catalyst (1981), which

reconfigured the engine

50

Pattern matching

Relatively good match with first three phases

Deviations in fourth and fifth phase, due to:

a) Decreasing pressure from public opinionb) Limited spillovers from the issue to consumer

demandc) Rise of competing issuesd) Strong resistance from the powerful car industry

4. Case study 2: Safety (1900-2000)

Main dynamic• Until 1960s: 3E-framing dominant (Engineering,

Education, Enforcement)• Car design was kept off agenda• Alternative framing in 1950s: crash engineering and

medical establishmentClash between professional communities (not driven

by ‘the public’)Nader (1965) + public outrage + policy learningNational Highway Traffic Safety Act (1966)Followed by resistance and implementation struggles

(seatbelt vs. airbag controversy)

Difference with case 1Public attention continuous rise spillover to consumer preferences in late 1980s

Relative importance of decision criteria for car purchase

‘Safety did not sell’ in 1950s and 1960s, but does in 1990s Market demand stimulates major industry effort

Automobile safety patents (based on USPTO)

Lesson: Industry fights regulation to delay issue progressionBut when issue spills over to markets, industry can accelerate and mobilize resources

5. Concluding comments

• Industries tend to postpone substantial solutions to ‘issues’

• External pressures important: public opinion, activists, politics, markets

• Pressure around issues develops gradually and dialectically (conflict)

• Issues go up and down

• What about climate change?

absolute # articles

0

1000

2000

3000

4000

5000

6000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

*

The Guardian

The Times

The Independent

Daily Express

Decreasing public attention

normalized: max=1

0,0

0,2

0,4

0,6

0,8

1,019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

*

The Guardian

The Times

The Independent

Daily Express

Volatile and low carbon price

• Kyoto successor postponed (limited political pressure)

• contesting the science (UEA ‘climate gate’)• Debates (Newsnight) on costs of green energy

Maybe the climate change issue moves back to earlier phase

Need to analyze pressures and responses(third case next year?)