Innovation processes in large technical systems: Market liberalization as a driver for radical change?

Electricity supply is a large technical system, which exhibits strong path dependencies and high barriers for radical innovations. Recent market liberalization, however, has initiated a fundamental restructuring. The paper analyzes how liberalization has altered innovation processes in the field of electricity supply. We examine three radical innovations under monopoly conditions and contrast the findings with the results from a survey on the innovation behavior of electric utilities in liberalized markets. We argue that the selection environment for innovations has changed in various respects. In our sample, new options open to innovation activities have emerged at the level of the firm and utility strategies turn out to be more heterogeneous. This may be interpreted as an increase in the variety of search processes, which may lead to a mid-term decrease of path-dependencies.