Waste and Innovation
How waste companies and government can interact to stimulate innovation in the Dutch waste industryProefschrift
ter verkrijging van de graad van doctor aan de Technische Universiteit Delft op gezag van de Rector Magnificus prof. Dr. Ir. J.T. Fokkema
voorzitter van het College voor Promoties,
in het openbaar te verdedigen op maandag 22 mei om 15.00 uur door
Martin Anthonius de Bree
Master of Business Administration Brunel University, United Kingdom
Dit proefschrift is goedgekeurd door de promotoren:
Prof. Mr. Dr. Ir. S.C. SantemaProf. Dr. Ir. J.C. Brezet
Samenstelling van de promotiecommissie:
Rector Magnificus, voorzitterProf. Dr. Ir. J.C. Brezet, Technische Universiteit Delft, promotor Prof. Mr. Dr. Ir. S.C. Santema, Technische Universiteit Delft, promotor Prof. Dr. W.A.H. Thissen, Technische Universiteit Delft
Prof. Dr. Ir. W. Ockels, Technische Universiteit Delft Dr. A. Lansink
Prof. Dr. T. Lindhqvist, Lund University, Zweden Prof. Ir. N.D. van Egmond, Universiteit van Utrecht
Waste and Innovation / How companies and government can interact to stimulate innovation in the Dutch waste industry
Martin A. de Bree
Thesis Delft University of Technology, Delft, the Netherlands
ISBN 90-809-618-5-X NUR 973
Copyright © 2005 by Martin A. de Bree
Production by Craanen Communicatie Management & Consultancy, Malden Coverdesign by Eyecab, Nijmegen
Layout by Studio Wijkamp, Silvolde
Distributed by Berghauser Pont Publishing, Amsterdam info@berghauserpont.nl
Preface and Acknowledgments
In the early 1980s I first entered the world of environmental technology, working on a method to remove heavy metals from waste water. For years I thought that if one had developed the right technology to solve an environmental problem and the economics were beneficial, succesfull appli-cation was an automatic result. With the help of Joost Quakernaat I later learned that technology is but one factor out of many to solve an environmental problem. Also political, emotional, social and institutional aspects determine whether or not a technology will become successful. Joost, I thank you for the inspiring meetings in Apeldoorn when we talked about this issue.
In the 15 years during which I worked in the waste industry, I have seen many innovations succeed and fail. This phenomenon has grasped my interest in such a way that I have made it the subject of my MBA thesis and of this thesis. Especially the observation that innovations which appear promising from both a technical and economical point of view, could nevertheless fail to succeed and, the other way around, innovations without seemingly technical or economical benefits could become commercial successes, has gained my growing fascination.
The Dutch environmental policy has been very successful in many aspects. The waste industry in the Netherlands has developed into one of the most advanced in the world. The challenge of man-aging the waste problem has been brought to an impressive result. We now face a new challenge in the Dutch waste industry. That is how to keep our high level of waste management, given the internationalisation and how to innovate our waste management methodologies.
With this research I intend to contribute to the knowledge about the relation between policy, regu-lations and innovation in the waste industry. I hope that the outcomes will make stakeholders in the waste industry and other industries realise that they are all part of a bigger picture in which respectful exchange of knowledge can lead to significant improvements.
This thesis has been completed with alternating periods of standstill and high productivity. I thank Sicco Santema and Han Brezet for their motivating and enlighting contributions. I thank Max Meltzer who was willing to correct the text during long train trips.
I thank all friends and colleagues whom I have had the honour to meet during the past years working on this research project for their enthousiasm and I dedicate this thesis to those who are committed to innovation in the interest of people and planet.
Thanks Petra for your unconditional support and unlimited trust. I am intensily grateful for this. This thesis was made possible with the help of Syncera.
Martin de Bree
-Content
PREFACE AND ACKNOWLEDGMENTS 5
1 SUMMARY 13
2 INTRODUCTION 15
2.1 THE DUTCH WASTE INDUSTRY 15
2.2 BACKGROUND OF THE PROBLEM 16
2.3 INTRODUCTION TO THE PROBLEM 17
2.4 NOTION OF THE PROBLEM 21
2.5 STRUCTURE OF THE THESIS 22
3 THE DUTCH WASTE INDUSTRY 23
3.1 WHAT IS WASTE? 23
3.2 DIFFERENT TYPES OF WASTE 24
3.2.1 Paper 24
3.2.2 Glass 24
3.2.3 Plastics 24
3.2.4 Specific hospital waste 24
3.3 THE DUTCH WASTE INDUSTRY 25
3.4 WASTE POLICY AND LEGISLATION/REGULATIONS 27
3.4.1 National policy and regulation 27
3.4.2 Waste management and export policy 29
3.5 CONCLUDING REMARKS 30
4 EXPLORATION OF THE PROBLEM 31
4.1 DEFINITIONS AND THE ROLE OF INNOVATIONS FROM A PERSPECTIVE OF 31
BUSINESS ECONOMICS
4.2 THE ENTREPRENEUR 35
4.3 THE INNOVATIVE ORGANISATION 38
4.4 THE ROLE OF THE GOVERNMENT VIS-A-VIS INNOVATION 40
5 CONCEPTUAL MODEL AND RESEARCH QUESTIONS 43
5.1 CONCEPTUAL MODEL 43
5.2 SCIENTIFIC POSITION OF THE RESEARCH 44
5.3 PROVISIONARY CONCLUSIONS AND OPERATIONAL RESEARCH QUESTIONS 44
6 THE RESEARCH PLAN 47
6.1 GOAL OF THE EMPIRICAL RESEARCH 47
6.2 RESEARCH STRATEGY 47
6.2.1 Questionnaire 47
6.2.2 Interviews 48
6.2.3 Case studies 48
6.2.4 Resuming the empirical multi method research 49
6.2.5 Literature study 49
6.3 THE MEASUREMENT OF INNOVATION 50
7 QUESTIONNAIRE 55
7.1 INTRODUCTION 55
7.2 RESPONSE 56
7.3 INNOVATIVITY OF PRIVATE AND PUBLIC COMPANIES 57
7.4 INNOVATIVITY OF SMALL AND BIG COMPANIES 58
7.5 INFLUENCE OF POLICY ON INVESTMENTS IN NEW TECHNOLOGY AND INNOVATION 59
7.6 INFLUENCE OF LEGISLATION AND REGULATIONS ON INVESTMENT IN 61
NEW TECHNOLOGIES AND INNOVATION
7.7 CONCLUDING REMARKS 65
8 INTERVIEWS 67
8.1 INTRODUCTION 67
8.2 RESULTS OF THE INTERVIEWS 67
8.2.1 General data 67
8.2.2 Description of the innovation 67
8.2.3 Role of the government 68
8.2.4 Commercialised innovations 69
8.2.5 Not commercialised innovations 71
8.2.6 Suppliers and advisors 73
8.2.7 Expectations 73
8.2.8 Role of the government 73
8.2.9 Subsidies 74
8.2.10 Reasons for failing commercialisation to occur 74
8.2.11 Are small companies more innovative than big companies? 76
8.3 CONCLUDING REMARKS 76
9 CASE STUDIES 79
9.1 INTRODUCTION 79
9.2 TREATMENT OF SPENT CONSUMER BATTERIES 79
9.3 THERMAL IMMOBILISATION OF HARBOUR SLUDGE 82
9.4 THE APPLICATION OF PHOSPHORUS SLAGS AS SECONDARY CONSTRUCTION MATERIAL 85
9.5 THE INCINERATION OF HAZARDOUS WASTE 87
9.6 CONCLUDING REMARKS 90
10 INNOVATION IN THE WASTE INDUSTRY 93
10.1 WASTE POLICY 94
10.2 THE STICK: LAW AND INNOVATION 95
10.2.1 Regulation 96
10.2.2 Innovative law 97
10.2.3 Law as a product 97
10.2.4 Law as innovation 99
10.2.5 Interaction between legal disciplines 99
10.3 THE CARROT: ANTICIPATING ECONOMIC INTERESTS 103
10.4 THE SERMON: COMMUNICATION AND PARTICIPATION 104
10.5 THE PRO-ACTIVE INDUSTRY 105
10.6 CONCLUDING REMARKS 108
11 CONCLUSIONS, DISCUSSION AND RECOMMENDATIONS 111
11.1 REFLECTIONS FROM THE RESEARCH 111
11.2 WHAT IS THE AMOUNT OF INNOVATION IN THE WASTE INDUSTRY? 111
11.3 HOW IMPORTANT ARE POLICY AND REGULATIONS FOR INNOVATION 113
BY WASTE COMPANIES?
11.4 ARE THERE DIFFERENT OPTIONS FOR THE PROCESS TO CREATE INNOVATION 114
FRIENDLY POLICY AND REGULATIONS AND WHICH ARE THEY?
11.5 WHICH FACTORS SHOULD BE DECISIVE TO CHOOSE ANY OF THESE OPTIONS? 116
12 REFLECTION AND SUGGESTIONS FOR FURTHER RESEARCH 117
12.1 BEYOND WASTE …. 119
13 LITERATURE 123
APPENDIX 1 LETTER AND QUESTIONNAIRE 133
APPENDIX 2 CHECKLIST INTERVIEWS 138
APPENDIX 3 INTERVIEWEES 139
APPENDIX 4 COMPLIANCE COMPETENCE CHECKLIST 140
1 Samenvatting Afval en Innovatie
De Nederlandse afvalsector heeft zich de afgelopen 40 jaar ontwikkeld tot een professionele bedrijfstak. Er is een gediversificeerde afvalbeheer structuur opgezet met goede faciliteiten op zowel logistiek gebied als op het gebied van opslag, recycling en verwerking van afvalstoffen. De Nederlandse overheid heeft aan deze ontwikkeling bijgedragen door het ontwerpen van afvalbe-leid en het stellen van strikte regelgeving voor het beheer van afvalstoffen. De Nederlandse afval-bedrijven zetten inmiddels gezamenlijk tussen 4 en 5 miljard euro om. De betrokkenen realiseren zich dat deze ontwikkeling niet mogelijk zou zijn geweest zonder afvalbeleid en regelgeving. Ondanks de snelle ontwikkeling van de Nederlandse afvalsector, bestaat de indruk dat het niveau van innovatie in de sector laag is. De hoofdvraag die deze thesis beoogt te beantwoorden is hoe de overheid en afvalbedrijven op elkaar kunnen inspelen om innovatie in de afvalsector te stimule-ren. Subvragen zijn:
1. Wat is het niveau van innovatie in de afvalsector?
2. hoe belangrijk zijn afvalbeleid en regelgeving voor innovatie door afvalbedrijven? 3. zijn er verschillende opties voor het proces om een innovatie-vriendelijk wettelijk kader te
creëren en zo ja, welke zijn deze opties?
4. Welke factoren zijn beslissend bij het maken van een keuze uit deze opties?
Om de hoofdvraag en de subvragen te kunnen beantwoorden is een multi methode onderzoeksop-zet ontworpen. Het empirisch onderzoek bestaat uit een vragenlijst, interviews en een case studie. De vragenlijst is gestuurd aan Nederlandse bedrijven die een vergunning hebben om afvalstoffen te mogen ontvangen. De respondenten hebben informatie verstrekt over het aantal werknemers, investeringen, bestedingen aan onderzoek en ontwikkeling, aantal octrooien, de verdeling van aandelen over publieke en private aandeelhouders, invloed van afvalbeleid op innovatie, invloed van regelgeving op innovatie en invloed van de Ladder van Lansink op innovatie.
Interviews zijn gehouden met 13 innovatoren, vooral nieuwe toetreders. De geïnterviewden hebben informatie verstrekt over hun innovatie, hoe zij de rol van de overheid ten aanzien van het inno-vatieproces hebben ervaren, oorzaken van succes en mislukking, het gebruik van toeleveranciers en adviseurs, subsidies en factoren die voor het succes of de mislukking van de innovatie beslis-send zijn geweest.
De case studie beschrijft de pogingen van vier innovatoren. De cases zijn het recyclen van bat-terijen, de thermische immobilisatie van havenslib, het toepassen van fosforslak (niet zijnde een afvalstof) als bouwmateriaal en de verbranding van gevaarlijke afvalstoffen in draaitrommelovens. De case studie geeft informatie over het belang van regelgeving, de betrokkenheid van de overheid bij het innovatieproces, het verschil tussen innovaties die onder sterke overheidssturing tot stand komen en die onder vrije marktomstandigheden tot stand komen, de mate waarin de innovatie als radicaal of incrementeel kan worden beschouwd, investeringen en opties om te komen tot innova-tie-vriendelijk beleid en innovainnova-tie-vriendelijke regelgeving.
Met deze multi methode benadering kon een deel van de subvragen worden beantwoord, maar voor het beantwoorden van met name de subvragen 3 en 4 was nog verder literatuuronderzoek noodza-kelijk. Dit literatuuronderzoek heeft, in combinatie met de resultaten van het empirische onder-zoek, geleid tot een model voor het creeren van innovatie-vriendelijk beleid en innovatie-vriende-lijke regelgeving. Dit model is gebaseerd op een bestaand model dat is ontwikkeld door Ren (2003). In dit model zijn twee aspecten met name relevant.
Aanbevolen wordt om een objectieve en effectieve testmethode te ontwikkelen om het competentie-niveau van bedrijven vast te stellen. Deze testmethode dient geschikt te zijn om zowel de motivatie als de bekwaamheden van een bedrijf te meten. De thesis geeft aanbevelingen voor het praktisch ontwikkelen van de testmethode.
Het tweede aspect betreft de behoefte van de overheid om radicale innovaties in de afvalindustrie te forceren. Radicale innovaties kunnen worden geforceerd door regelgeving die de sector in vol-doende mate destabiliseert. Hoe meer de overheid radicale innovaties wenst te forceren, des te meer zou de overheid de invloed op het wettelijk kader naar zich toe dienen te trekken om zo de normen te kunnen dicteren.
2 Introduction
2.1 The Dutch waste industry
In the waste industry important progress is made to dispose of waste in such a way that the environment is affected less heavily. Only in the sixties both inorganic and organic solid haz-ardous waste from all over Europe was landfilled without any protecting measures in the Volgermeerpolder (Noord-Holland). Liquid hazardous waste was incinerated in open air in that same period on the Diemerzeedijk (Noord-Holland). All this was approved by the public authorities and has led to the most severe contaminated sites in the Netherlands. Municipal waste containing several harmful components like batteries, oil and solvents was mainly landfilled in that period.
Figure 2-1 Dumped hazardous waste in the Volgermeerpolder
Forty years later, a waste disposal structure has been developed which garantuees not only a safe destruction of wastes (special protected landfill sites, dedicated incineration) but also reuse and useful application of a great number of wastes (for example glass, paper and incineration ashes). Figure 2-2 shows the amounts of waste and their disposal method.
Figure 2-2 Amounts of waste and their method of disposal (Afval Overleg Orgaan, 2003)
0 10 1985 1990 1995 1996 1997 1998 1999 2000 2001 20 30 40 50 60 70
Discard Landfill Incineration Recycling Quantity
2.2 Background of the problem
In spite of the fact that useful application and reuse of waste has become more important over the years, a large part of the total waste quantity is still landfilled, incinerated or composted. Table 2-1 shows the amounts of non-hazardous waste differentiated per disposal method. The amounts of hazardous waste are much smaller than non-hazardous waste and were monitored separately from non-hazardous waste until january 2005.
Table 2-1 Non-hazardous waste disposal methods in Mton (Afval Overleg Orgaan, 2003)
Disposal method 1993 1994 1995 1996 1997 1998 1999 2000 2001 Landfill 13.000 12.150 9.800 8.450 7.400 7.100 7.600 6.550 6.500 Private landfill 1.800 600 750 500 400 450 420 400 240 Incineration 2.850 2.600 2.800 3.550 4.350 4.550 4.750 4.800 4.700 Composting 900 1.200 1.450 1.500 1.500 1.500 1.500 1.550 1.450
The amount of landfilled waste is reduced from 13 million tonnes in 1992 to 6.5 million tonnes in 2001. Per December 31, 2001, 32 landfill sites were in operation, 18 in state of closing, 3 in proce-dure and 1 temporary closed (Afval Overleg Orgaan, 2003). This reduction was mainly caused by an increase in incineration capacity, initiated through the policy of the Dutch government. An impor-tant principle in this policy is to stop landfilling incinerable waste and realise sufficient incinera-tion capacity to be able to do so. During the years 1993 - 2001 the amount of incinerated waste has increased from 2.85 million tonnes per year to 4.7 million tonnes per year. In 2001, 12 waste incin-erators were in operation of which one suitable for mixed hazardous waste and one incinerator dedicated for hazardous hospital waste (Afval Overleg Orgaan, 2003).
Next to landfill and incineration, waste is composted. The amount of composted waste has remained unchanged in the period 1995 - 2000 on 1.5 million tonnes per year. In 2002, 25 compost-ing installations were in operation (Afval Overleg Orgaan, 2003).
The most significant change in the years 1995 - 2000 is that much less waste is landfilled and much more waste is incinerated.
The applied technologies for waste processing have changed only slightly in the last twenty years of the 20th century. Municipal waste and incinerable non hazardous industrial waste are without significant exception incinerated on grate kilns. The technological concept is identical to that which is used since the first installations of a.o. Afvalverwerking Rijnmond (AVR) in the early 1970's.
All waste incineration companies recover the energy content of the waste. The Afval Energie Bedrijf owned by the City of Amsterdam, has implemented worthful innovations, such as a highly efficient waste incineration.
emit-tors were closed down because it was not feasible to do the required investments. This is in itself a sign that investment in innovations have an economical aspect. Also, the scale at which inicinera-tion installainicinera-tions could be operated economically, increased.
Incinerable hazardous waste is mainly incinerated in rotary kilns since the early 1980s. From mid 1990s on, a growing amount of hazardous waste is incinerated in foreign cement kilns as secondary fuel.
Landfill sites were faced with tighter standards since to prevent harmful components of the waste form being released into the environment. These standards were formulated as protective mea-sures following the principles of isolating, managing and controling (isoleren, beheersen, controle-ren, shortly IBC criteria; EC, 1999).
Composting of organic waste can be done in two different ways. Aerobic composting is a process which allows oxygen and is cheaper than inaerobic composting, which excludes oxygen from the process.
The main conclusion is that since 1993, the amount of landfilled waste has halved, and the amount of waste being incinerated has doubled. No significant amounts of waste are processed using new technologies since 1993.
2.3 Introduction to the problem
During the first period of attention for the environment and waste disposal, i.e. the early 1970s until the mid 1990s, the Dutch government determined the technologies used for waste disposal by prescribing technologies in the licensing policy (Ministerie van VROM, 1993) and by executing the policy through the operation of waste disposal plants (Bezem, 1997). In this period the Dutch gov-ernment had much influence on the choice of the applied technologies and the implementation of the waste policy. Since 1998 the government tends to withdraw from waste policy inplementation and allows market forces to have increased influence on the waste industry (a.o. Van der Meij, 1998 and Eberg, 1998).
Another factor worth mentioning is that the Dutch waste industry becomes more internationally oriented. More categories of waste can be exported and foreign waste processors enter the Dutch market to offer their services (a.o. Nijhuis, 2001, Vroonhof, 1999, Van Tuijn, 1998a, Afval Overleg Orgaan, 2000).
These two factors, liberalisation and internationalisation, reinforce each other. The functions from which the government withdraws can also be taken over by foreign companies.
It also appears that the selection process of waste management technologies1 during the period of
governmental control over the Dutch waste industry results in other technological choices than the selection process without this control. In the light of these developments a number of technol-ogies, like the rotary kilns used for the incineration of hazardous waste and the household waste incinerators using grate kiln technology, seem to loose their right of existence in favour of cement kilns and energy plants, which apply waste as a secondary fuel. This appears to be more cost effec-tive than the dedicated waste incinerators. The costs for incinerating waste in grate kilns lay around € 90,- per tonne and the costs for incineration waste in rotary kilns lay around € 300,- per tonne. The costs of the incineration in cement kilns or energy plants lay around zero, because waste replaces primary fuels with a positive economic value (Goverde, 1993). The existing
gies are not always able to compete with new used technologies - mostly outside the Netherlands - and the corresponding companies are threatened by closure with all the forthcoming economic and social consequences (a.o. AOO, 1998, Afval, 2002, Van Bezooijen, 2003);
• The continuity of the waste removal can be jeopardised when obsolete installations are closed before alternatives are operational. This is a strong argument to let public organisations control ‘’fall back’’ disposal sites (EU, 2002, Ministery of Environment, 2003a, 2003b);
• Existing players seem to have difficulties in anticipating the changing requirements for inno-vations under free market conditions. The export of hazardous waste to foreign cement kilns and the recent increase of the export of non-hazardous waste to Germany are examples of this notion (Donders, 2003).
It should be emphasised that these notions apply to the bulk of all waste streams. Many small innovative companies have been founded successfully to recycle specific waste streams2 (such
as electronics waste and used cars and form exceptions to this notion. They do not appear to be hindered in their attempts to innovate.
In addition to these problems, innovations are hindered by a number of factors which are valid both in the past and present situation:
• Licensing to private parties
In areas within the waste industry where the government is still influential such as incinera-tion and landfill, the private companies are hindered in their attemps to innovate because these activitities are dominantly licensed to public companies;
• Ladder of Lansink
In the 1970s, a member of the Dutch parliament Dr. Ad Lansink, developed a policy instrument for waste removal (Tweede Kamer 1979-1980). This so-called ladder of Lansink, still the founda-tion for Dutch waste policy, implicates a priority order for waste removal. The highest priority is given to prevention of waste. Second in the priority order is reuse of waste, which means use of the waste in the original function. Third on the list is useful application in another than the original. The fourth priority is given to incineration. Last on the list is landfill. Figure 2-3 shows this priority ladder.
Figure 2-3 Ladder of Lansink
prevention
reuse
useful application
incineration
The Ladder of Lansink implies competition between prevention and recycling (reuse and useful application) with a political priority for prevention. This means that theoretically there is an entrepreneurial risk for waste recyclers because of the uncertainty about the future availability of the waste, which is the raw material they need to acquire. Also, in some situations one could defend that reuse is more sustainable than prevention, for example if prevention leads to the extra use of scarce raw materials (Van Tuijn, 1998b). Vogtländer has expressed criticism on the Ladder of Lansink and proposes a new order of preferences for waste management (Vogtländer, 2001). Ren (2003) agrees with Lansink that sound waste management should follow a hierarchy of four Rs i.e. Reduce, Reuse, Recycle and Recovery before final disposal.
• Licensing time
The time needed to obtain permits, especially when a Environmental Impact Assessment (MER) is needed by carried out, is long in relation to the fast changing waste industry. This creates another uncertainty for potential innovators because it takes a long waiting time before the innovator can start to benefit economically from his innovation (Krozer, 2002);
• Complex regulations
Waste regulations are very complex and violations of regulations are punished severely. In the case of Tank Cleaning Rotterdam (TCR) for example emprisoning sentences of up to six years were applied to those responsible for illegally disposing of waste water in the harbour of Rotterdam. This risk of severe penalties might deter potential innovators;
• Changing waste policy
The Dutch waste policy changes fast which leads to uncertainties for potential innovators. For the specific area of electronics waste this has been recognised by Boks (2002). A growing num-ber of directives and regulations are imposed by the European Commission, which makes waste policy even more unpredictable and complex.This has given the government the image of a non predictable partner for private companies when it comes to investments in the development and implementation of new products and services.
These observed developments lead to the assumption that conditions for innovation of waste oriented products and services are not ideal, maybe even unfavourable. There appear to be vari-ous obstructions for innovation of products and services in the Dutch waste industry and these obstructions seem to have different causes.
It is generally assumed that innovation in a free market usually leads to better products or servic-es for the same price or identical servicservic-es or products for a lower price. This point has been recog-nised by several authors including Tidd (1997), Tushman (1997) and Quinn (1988). Innovation thus offers opportunities to make waste oriented products and services more effective and efficient. Traditionally economic growth is coupled to an increasing pressure on the environment. Economic growth has thus resulted in soil contamination and the distribution of toxic substances like heavy metals and polychlorinated biphenyls (PCB’s) and many other environmental problems, such as described in standard works like Carson (1962) Reijnders (1986), and Winsemius (1986).
the uncoupling has not yet been realised. Examples are emissions which are related to energy consumption (noise and nitrous oxides), loss of biodiversity and the growth of the total amount of waste produced. To realise a sustainable uncoupling of economic growth and environmental impact it is necessary that government and private sector interact in such a way that the existing capabili-ties for innovation are utilised more effectively.
The Commission Markt en Overheid has studied the phenomenon of public organisations which compete with private companies on a request of the Ministers of Economic Affairs and Justice. If public organisations compete using their exclusivity from their public function, the report calls these organisations ‘’organisations with exclusive or special market rights’’ (OESM). The commis-sion Markt en Overheid (1997) identifies in this report the risk that these OESMs obtain an uncon-trolled autonomy and access to easy money. The report also gives recommendations for the preven-tion of unwanted limitapreven-tion of competipreven-tion.
In 2003- 2005, there was discussion at the highest political level about the question of how legal instruments can be used to influence behaviour. In the Netherlands this discussion has been fuelled by incidents in Enschede (explosion of a fireworks site) and Volendam (fire in a pub) in which a significant number of people died. Later, after investigation it turned out that both inci-dents where partly caused by lack of clear permits or control of the compliance with these permits. These incidents and the investigations following these incidents caused a change in attitude of the public bodies responsible for law enforcement. Allowing activities which are not licensed was not practiced anymore and a tighter and a stricter system of enforcement was implemented3.
Scientific literature refers to a number of obstacles for implementation of environmental innova-tions. Enviromental innovations are here defined by Cramer and Schot (1989) as innovations that lead to cleaner production processes and products4. These authors mention three obstacles:
1. Lack of expertise and know how of the innovator; 2. Lack of capabilities to innovate or capacity to innovate;
3. Lack of clear articulated demand for cleaner production processes and products. In a workshop about the development and implementation of environmental technology (in Cramer and Schot, 1989) it was concluded that little research has been done about the possibili-ties to stimulate innovation by means of technology forcing policy instruments (like setting of standards, taxes, tradeable emission rights and grants), especially not from a clearly formulated theoretical perspective.
The public sector plays different roles in the Dutch waste industry. It develops legislation and implements this legislation through a system of permitting and enforcement, whilst some of the permit holders are also public organisations. The waste sector also consists of private companies. Specialised in waste collection and waste processing activities. Sometimes public and private com-panies work together in public private partnerships (PPS).
In an OESO study (2000) it was concluded that the public sector cannot take for granted that laws and regulations automatically result into the desired behaviour of the target group. Desired behav-iour can be encouraged by involving the target group at an early stage of the lawmaking process. Esty and Gerardin (2000) introduce the idea of inviting more parties, especially non public parties, into the lawmaking process than is currently practised.
3. See also the website www.handhavenopniveau.nl of the Dutch public bodies
2.4 Notion of the problem
The previous paragraph has identified a variety of mechanisms in the Dutch waste industry which may influence innovation. There appears to be some kind of relationship between the public tasks of making policy and regulation on one side and innovation in the Dutch waste industry on the other side. In this thesis the different roles of the public sector and their relation to innovation are important subjects for study.
This thesis focuses on policy and regulation in the Duthc waste industry. A sound understanding of the terms policy and regulation requires a clear definition of those terms. The definitions used in this thesis are those of the Penguin All English Dictonary (Garmonsway, 1970). Policy iis defined as the course of action planned by government. Regulation follows policy and is defined as by law prescribed rules. The scope of this thesis covers the Dutch waste industry and examines all wastes materials.
Furthermore, it is important to create a better understanding of the relationship between policy, laws and regulations.
Ren (2003) has developed a model for both legal and technical infrastructure of municipal solid waste management. Although this model is limited to municipal solid waste management (solid waste from households, i.e. non hazardous and non industrial), it is helpful to understand the con-text of this thesis. Figure 2-4 shows the model.
Figure 2-4 Infrastructure for municipal solid waste management (Ren, 2003)
Ren defines the institutional infrastructure as the public organisations which play a role in gener-ating legal means. In this thesis, in accordance with Ren, the whole of institutional infrastructure and legal means is called the legal framework. Figure 2-4 also shows that the legal infrastructure relates to the technical infrastructure.
Legal infrastructure
Technical infrastructure
Institutional framework Legal mean
Legislators, policy makers (parlialment, lawmakers)
Government (administrators)
Specific regulating authorities (EPA, municipalities etc.)
R&D Monitoring and testing Policies, stategies Laws Regulations Standards Penalty provisions
Waste collection, sorting
Recycling plants
Composting facilities
Incineration plants
2.5 Structure of the thesis
Chapter 3 provides a description of the Dutch waste industry. Chapter 4 of this thesis provides an in depth exploration of the problem. In chapter 5 a conceptual model is presented and the cental research question and subquestions are formulated. In chapter 6 the research plan is designed and described. Research methods are described and accounted for. Chapters 7, 8 and 9 contain empiri-cal material from cases studies, interviews and a questionnaire respectively. In chapter 10 most relevant literature on this topic is presented.
In chapter 11 conclusions are drawn from the material described in chapters 7, 8, 9 and 10 and rec-ommendations are formulated. Chapter 12 draws the conclusions into a broader perspective than the Dutch waste industry.
Figure 2-5 gives the structure of the thesis.
Figure 2-5 Structure of the Thesis
1 Summary 2 Introduction 3 The Dutch Waste Industrie 4 Exploration of The Problem 5 Conceptual model and research questions
6 Research plan
8 Interviews 9 Case studies
3 The Dutch waste industry
In this chapter the Dutch waste industry is decribed to give some insights in the structure of the industry. The legal difference between waste and non-waste is determines the company’s alterna-tives of handling the material in question. Examples of different types of waste and their disposal structure are illustrated and the companies which dominate the market are briefly introduced. Finally, the author touches on waste policy and legislation/regulations.
3.1 What is waste?
The definition of waste has been a subject of discussion for the last 30 years. The definition from the Dutch Environmental Management Act (Ministerie van VROM, 1993) is any substance or object in
the categories which the holder discards or is required to discard. In practice, the above definition does not
always give a clear answer to the question whether or not a material is to be considered a waste. The term to discard of describes the intention with which one removes the material. It implies that two materials with exactly the same composition and properties can be a waste or a non-waste, depending on the way it is handled.
An illustrative example is the production steelslags as a byproduct of steelmaking which are then sold as a construction material. Numerous people defend that this material is to be considered a waste because of the fact that it was not intentionally produced (steel is the product intended to be produced), which renders it into a waste.
The implications of this classification can be significant. For example, if slags are defined as con-struction material not being a waste, it might be possible to use the material for road concon-struction purposes giving the material a positive value.
As soon as the owner intents to discard of the material, it is considered a waste as defined by the Environmental Management Act. If by special treatment the waste material is adjusted (chemically or physically) in such a way that it meets specifications for a certain application it is legally pos-sible that it looses the status of a waste material.
If a material is to be classified as waste, this application might not be allowed and the material must be disposed of against a negative value. It can get worse. If the material is to be considered a waste, the owner must determine whether or not it is a hazardous waste according to European legislation. This is even more important if one considers the severe legal consequences of disposing of materials as a non-waste where the autorities consider the material a waste. Removing waste in breach of the rules is an Economic offense, subject to severe penalties including imprisonment. The Dutch government developed a decision tree (Ministerie van VROM, 1995) allowing a determina-tion of a material was to be waste without too much doubt. Soon after this decision tree was pub-lished and formalised on a national level, European jurisprudence showed this waste conception to be too narrow. Consequently, new uncertainties were created for a number of material owners. A substance is to be considered a waste if any one of ten questions can be answered by ‘yes’. In practice this means that if there is any doubt whatsoever, a material should be considered waste. Even a material with positive economic value (one of the ten criteria) may appear to be waste.
3.2 Different types of waste
This difference is important because the regulations for the collection and removal of hazardous waste are more stringent than for non-hazardous waste.
Examples of hazardous wastes are batteries, pesticides, asbestos and polychlorinated biphenyls (PCB’s). Examples of non-hazardous wastes are demolition waste, paper, glass and household waste. The national Waste management plan (Ministerie van VROM, 2003) includes tailored policy plans for 345 different waste streams.
Different waste streams are collected and disposed of by different companies. Every market seg-ment has its own characteristics, which makes the waste industry rather complex.
Some examples are elaborated giving the reader an impression of the diversity of the Dutch waste industry (AOO, 2003).
3.2.1 Paper
2.6 million tonnes of paper waste is collected in the Netherlands each year of which 1.0 million tonnes comes from households. The VAOP is contracted by most of the Dutch municipalities to provide paperwaste collection services. Other players in the paperwaste collection market are AVR, SITA and Essent. The paper processing industry is dominated by eight companies: VAOP with a country covering network, Scherpenzeel Utrecht, SITA, Parenco/Reparco, Huhtamaki/Reitsma, Nijssen/de Vries/VAOP-combination, Van Gansewinkel and Van Puyflik.
The production market is dominated by four big paper producers: Kappa, Parenco, SCA-De Hoop and Smurfit. Paper is a relatively international business. Yearly 1.3 million tonnes are imported and 1.2 million tonnes are exported (AOO, 2003).
3.2.2 Glass
Collection of glass waste (410,000 tonnes per year) is dominated by VAOP and Van Gansewinkel. Recycling of glass is strongly dominated by maltha, a subsidiary of Van Gansewinkel and Verenigde Glasfabrieken/BSN. In the Netherlands four glass producers are using recycled glass in their pro-duction processes (AOO, 2003).
3.2.3 Plastics
29 collection firms for plastics operate in the Netherlands. Plastics are also recovered as a product of separation. Processing of plastics is done by Lankhorst and Kras. Arena, a subsidiary of chemi-cals multinational DSM, Wavin and Essent have recently gone broke due to Asian competition. Much of the plastic waste is delivered to cement companies and power plants in Belgium, Germany and Sweden as a secondary fuel, separately or mixed with paper. A big part of the plastic waste is exported to Asia (Hong Kong, China, India and Pakistan) and Eastern Europe for recycling (AOO, 2003).
3.2.4 Specific hospital waste
Hospitals produce specific waste which is considered hazardous due to the risk of infection. This specific hospital waste (about 6,000 tonnes per year) is collected by waste collectors like SITA and Van Gansewinkel. The waste is directly put into dedicated drums which can be sealed by a cover
which cannot be removed to prevent the waste from contaminating the environment. SITA, Van Gansewinkel and GEVUDO, a Dordrecht based company which operates an installation for the incineration of household waste, have formed a joint venture called ZAVIN which owns a specific incinerator for specific hospital waste. This joint venture was formed during the time the govern-ment decided to separate the treatgovern-ment of specific hospital waste from the incineration of other hazardous waste by AVR Chemie (MJP GA, VROM, 1993). AVR Chemie was forced to no longer accept specific hospital waste with an exception for technical problems at ZAVIN by adjustment of its per-mit (VROM, 2003).
These examples are chosen at random and show the variety of wastes and their specific market conditions. The next section provides a rough impression of the waste industry. Further on this thesis is narrowed to innovation processes in the waste industry.
3.3 The Dutch waste industry
The Dutch waste industry is a young industry with a logistic side and a process-industrial side. First of all, all of these tonnes of waste have to be moved from waste owner to the location where the waste is processed. Second, waste is processed in different ways, as we have seen in the previ-ous chapter. The processing of waste can vary between simple processes like sieving, breaking and packing to incineration and distillation.
The Dutch waste market is estimated to turnover € 4.6 billion in 2000, which is 40% of the total environmental costs. (RIVM, 2002). The turnover of € 4.6 billion is divided over waste collection (€ 2.011 billion), waste treatment (€ 1.83 billion) and reuse of waste (0.768 billion). The costs of trans-portation of waste is not included in these figures.
Figure 3-1 The Dutch waste industry has become a large scale operation (AVR by night)
During the recent years a concentration has taken place as a consequence of the take-over of small companies by big companies. In 2001, the turnover of the five biggest companies totalled € 2.0 bil-lion, being 40% of the market. The biggest companies and their turnover are shown in Table 3-1.
Table 3-1 Ranking and turnover of biggest waste companies in the Netherlands (numbers of 2001)
Ranking Company Turnover (M¤) Shareholder 1 SITA Nederland 488 Private (French)
2 AVR 485 Public (City of Rotterdam)
3 Essent Milieu 419 Public (provinces and municipalities) 4 Van Gansewinkel Groep 327 Private (Dutch)
5 Shanks Nederland 265 Private (UK)
So we see that the five biggest companies have a market share of 43%. The top five Dutch waste companies are concisely described here.
SITA is a subsidiary of Suez-Lyonaisse and the biggest European waste management firm with its headquarters in Paris (F). In the Netherlands SITA focuses on waste collection and recycling. In addition, SITA owns the only private waste incinerator in the Netherlands in Roosendaal. SITA has different plans for the construction of dedicated installation for the incineration of high calorific wastes and the production of secondary fuels.
AVR realises the biggest part of its turnover in the Netherlands. The shares of AVR are owned by the City of Rotterdam and is market leader in the waste incineration business owning 50% of the total Dutch incineration capacity. AVR has realised a modern separation plant in Rozenburg. Essent Milieu is a Dutch multi-utility company with activities in the energy, cable/telecom and waste industry. Essent operates two waste incinerators. Shares of Essent are owned by the prov-inces (74%) and municipalities (26%). Essent owned 45% of the shared of van Gansewinkel, a major waste collection company.
Van Gansewinkel Groep focuses on waste collection and recycling. Turnover in the Netherlands is € 327 million, in Belgium € 121 million. Van Gansewinkel also owns operations in France, Czech Republic, Portugal and Poland.
On the European scale of these companies only SITA and Shanks rank in the top 10 (1st and 6th
respectively).
The Dutch waste companies are organised in several branche organisation and lobby groups. In 1998, the Dutch Association of Hazardous Waste Processors (NVGA) merged with the Waste Management Association (Vereniging Afvalbeheer) into the Association of Dutch Waste Enterprises (VNAO). In this Association the private waste companies are represented. Recently, The VNAO has merged with the Association of Waste Processors (VVAV), which represented roughly the public owned waste companies. This new Association represents most of the Dutch waste companies. In addition, a number of specific Associations exist like the Federation Recovery Raw Materials (FHG, a federation with 10 member associations), the Dutch Association of Soil Cleaning Companies (NVPG), the Association of Recycling of Demolition Waste (BRBS) and the Dutch Association of Cleaning Directors (NVPG). Several smaller and more focused associations play a role in small seg-ments of the Dutch waste industry like industrial cleaning, ships waste, paper and oil waste, This description gives the reader some information about the structure of the waste industry. There are different waste companies with different strategies. The big players focus on all wastes while smaller players tend to specialise in specific waste streams.
The market share of the big five of 43% illustrates the level of concentration in this industry.
3.4 Waste policy and legislation/regulations
3.4.1 National policy and regulation
In the 1970's Dutch society became aware of the problems associated with environmental pollu-tion. The first areas receiving broad public attention were these where people experienced direct nuisances. This resulted in an initial focus on air and water pollution. One of the first legal instru-ments to reduce air pollution was a ban issued by the City of Haarlem around 1600 on the use of British or Scottish coal in stead of peat for breweries (Biersteker, 1968). The Netherlands issued the Nuisance Act in 1952. This Act was a modernisation of an Act of 1875, which already prescribed permit requirements by the City council. After the modernised Nuisance Act of 1952, more specific regulation was developed like the Groundwater Act Watercompanies of 1954, the Pesticides Act of 1962, the Nuclear Energy Act of 1963, the Surface Water Pollution Act of 1969, the Air Pollution Act of 1970 and the earlier Soil Protection Act of 1971 (Meijer Drees, 1972).
In 1971, the Ministry of Public Health and Environmental Hygiene was established. The ministry published a yearly Urgency Report (Eberg, 1997). Years later, the Chemical Waste Act (1976), the Waste Substances Act (1977) and the General Environmental Provision Act (1979) came into force. Originally, the Chemical Waste Act en the Waste Substances Act were meant to be one act, but were separated to prevent delay. Both acts stresses the importance of effective waste disposal.
In 1979 the motion of Lansink was passed stipulating a priority order for waste management. This ranking was prevention, product recycling, materials recycling, useful application, waste-to-ener-gy, secure landfill. This ranking is also known is as the Ladder of Lansink.
recent major clean up is that of the Volgermeerpolder north of Amsterdam, where chemical waste from all over Europe was landfilled during the 1960-ies. This focused political attention on the issues of soil contamination and waste management.
The Hazardous Waste Substances Act prohibited the uncontrolled depositing of hazardous waste but suffered from severe implementation problems, such as shortage of infrastructure, poor con-trol and enforcement of regulations and insufficient funds (Eberg, 1997).
The Waste Substances Act applied to non-hazardous wastes, which was mainly household waste, and contained specified tasks for the central government, provinces and municipalities. Municipalties were to collect the household waste at least once a week. Provinces were to make plans for waste management stating how much waste was to be expected and how this was to be disposed of. The Provinces also granted the permits for landfills, waste incinerators and other waste processing facilities. The central government supervised the execution of the Act and issued directives to the counties.
In 1987 the Soil Protection Act came into force.
In 1988, Ministry of Environment issued a Report on the prevention and recycling of waste (TK, 1988). This report dictated targets for 296 priority waste streams for the year 2000.
For specific waste streams including cars, spent consumer batteries, refrigerators, washing machines and packaging waste an Extended Producer Responsibility (EPR) Strategy was imple-mented. EPR is an environmental strategy contributing to the environmental objective of reducing total environmental impact from a product, by making the manufacturer of the product respon-sible for the entire life cycle of the product and especially for the take-back, recycling and final disposal of the product. The EPR is implemented through administrative, economical and informa-tive instruments. The composition of these instruments determines the precise form of the EPR (Lindhqvist, 1990 and 1992).
In 1993 The old Nuisance Act of 1952, the General Environmental Provision Act, the Hazardous Waste Act and the Waste Substances Act were replaced by the Environmental Management Act. This Act is a framework Act, containing chapters about establishments, environmental planning, environmental impact assessment, waste management and enforcement.
In 1990 the Afval Overleg Orgaan (AOO) was formed in which the three public layers (central government, procinces, municipalities) were represented. The AOO issued a ten-year plan for non-hazardous waste in 1992 which was reviewed in 1995 (AOO, 1992 and 1995). Initially, the industry represented by the Nederlandse Vereniging van Chemisch Afvalverwerkers NVCA was asked by the Minister of Environment to produce the first plan on hazardous waste (Ministry of Environment, 1991). The NVCA finshed this plan in 1992, but the Ministry of Environment did not agree with the proposed strategies and decided to produce the plan by itself. The Ministry of Environment and the joined provinces issued this policy plan on hazardous waste in 1993, which was reviewed in 1996 (Ministerie van VROM 1993 and 1996).
In 2003 the first integrated plan for non-hazardous and hazardous waste was published in the light of the European waste framework directive. This plan (Ministry of Environment, 2003) is still based on the Ladder of Lansink and contains sector plans for 34 different waste streams for which minimum standard removal strategies are defined.
Under the Environmental Management Act, tens of regulations and directives are in force affect-ing the removal and processaffect-ing of waste streams.
The government does spend money to stimulate technology development in the environmental field. Examples are the T-2000 program (stimulation of the development of waste processing tech-nologies (Novem, 1998 and 1999) and the EET program (www.novem.nl, 2003).
From this summary of the laws and regulations we can see that these laws and regulations as a result of waste policy have significant influence on the structure of the industry and even its very existence. One might postulate that if there would not have been such a detailed developed policy and regulatory framework, the waste market as we know it would not even exist. In that case, the waste market would perhaps be limited to a few companies depositing the waste on the closest available site not causing direct danger or nuisance. The turnover in the industry would be a frac-tion of the € 4,6 bln now realised in the Netherlands.This hypothetical situafrac-tion reflects the real-ity in lots of development countries.
3.4.2 Waste management and export policy
In the 1980's a number of scandals concerning waste exports were published in the mass media leading to public indignation. As a reaction the international community took action to make agreements on the control of waste exports.
In the Basel Convention (United Nations, 1989) it was agreed that the number of transfrontier shipments of hazardous wastes must be reduced to a minimum, pointing nations to their respon-sibility to solve their own hazardous waste problems within their own boundaries. Furthermore it was agreed that hazardous wastes must be processed closest possible to the source and that trans-frontier shipments of hazardous waste must be controlled. Witihin the framework of the Basel Convention, the OESO took the decision to introduce a system for classification of wastes which are to be shipped between OESO member countries. This system identifies three levels of waste. Wastes placed on the green list can be transported freely between OESO states. For the transport between OESO states of wastes placed on the orange list, a notification of the company shipping the waste is enough. For wastes placed on the red list all OESO states involved must give an explicit authorisa-tion before shipment.
As earlier explained in chapter 3, waste management has been classified by means of the Ladder of Lansink. This policy instrument differentiates between final waste removal (landfill and incineration without energy recovery), usefull application (in another function than the original function), reuse (in the original function of the material) and prevention. Usefull application and reuse are both forms of recycling.
The European Directive on Transfrontier Shipment of Wastes (EU, 1993) allows member states of the European Union to limit the export of waste if it is for the purpose of final removal. If the waste is recycled, member states have practically no possibilities to limit export of the waste to other EU member states.
During the early 1990’s, the difference between final removal and recycling was not always clear. One of the disposal methods, the incineration of waste in foreign cement kilns (in Belgium), was considered recycling by the cement companies and was considered final removal by the dedicated Dutch waste incinerators. Cement kilns use vast amounts of fuel to produce cement in long rotary kilns. If they replace virgin fuels by secondary fuels (in the form of wastes) they can cut down dra-matically on their variable costs.
small calorific value or content of usefull components leads to the conclusion that the use of wastes in cement kilns must be considered a form of recycling.
On top of this, mixing of wastes has become more acceptable as a consequence of the report ‘De Verwerking verantwoord’. This means that wastes which do not directly meet the acceptance crite-ria for cement kilns abroad, can be mixed to specification with other wastes and exported. In practice this means that the Dutch borders are open for export of nearly all types of waste. This means a drastically different situation for the Dutch waste industry, especially the incinerator companies who are facing competition from foreign companies, as a result.
In one of the case studies in chapter 9 the focus is on the incineration of hazardous waste in more detail.
During the period 1996 - 2002 the waste exported for recycling has doubled every year. Figure 3-2 shows this development.
Figure 3-2 Non-hazardous waste exported for recycling (AOO, 2003)
3.5 Concluding remarks
In this chapter a description of the waste industry has been presented. From this chapter the author concludes that the government uses several regulatory instruments in order to reach its political goals. These regulatory instruments have impact at different levels of the Dutch waste industry. Some just cover the collection and disposal of specific waste streams like Specific hospital waste, other instruments apply to a much broader group of wastes for example incinerable wastes. There seem to be two sides on waste policy and regulations. On one side policy and regulations create a market for the waste companies in the first place. Without policy and regulations there would be no waste industry at all because waste would be dumped in the closest landfill side at minimum costs. Because of policy and regulations waste owners are forced or encouraged to spend money on high level treatment or recycling of their wastes rather than resort to landfill. On the other side the control function of policy and regulation in the waste industry can be unfa-vourable for innovation processes.
In this way the Dutch waste industry has been influenced by the government as a policymaker and regulator. Several political and legal initiatives influence the structure of the Dutch waste
4 Exploration of the problem
In this chapter the problem is explored in depth, aiming to compose a clear research question. The purpose of this chapter is to find out how companies and government stimulate innovation. First, definitions of innovation and the economic relevance of innovation are outlined. In the second paragraph, the author looks into the entrepreneur in his role of individual innovator to be able to understand the factors that drive entrepreneurs to innovate. In the third paragraph, the innovative organisation is characterised to reach a better understanding of the factors that drive organisations to innovate. In the fourth paragraph, the author presents some views on the role of government as stimulator for innovation as it is clear that the government plays an important role in setting the framework in the waste industry in which innovators operate. It should be noted that two important limitations are set for this thesis. First of all, there is much literature about policy instruments in relation to innovation in general. Second, the author is aware of the fact that there is a complex network of companies, public bodies, knowledge institutes, consul-tancy firms and other stakeholders that might play a role in innovation processes in this industry. Several authors (Smits et al. 1994, Van Lente et al. 2003) have put emphasis on the importance of the interaction between these different stakeholders in the light of innovation. The framework set by government in terms of policy and regulations determines the borders of the Dutch waste industry. Therefore it is to be expected that this framework also determines the borders for inno-vation in this industry. Although we know from other sources that in other industries more stake-holders than government and suppliers play a significant role in innovation, the focus in this thesis is on the interaction between government and waste management companies.
So, this thesis is not about policy instruments which can be used for stimulating innovation in gen-eral. It is also not about the processes between all stakeholders leading to innovation. It is about the interaction between Dutch government and Dutch waste companies in the light of innovation. These limitations implicate that the conclusions drawn in this thesis can only be used for broader purposes with great caution.
In this chapter some highlights are presented of the literature which supplies some insights in the nature of innovation just to get a better understanding of the challenges and to enable the author to formulate research questions.
4.1 Definitions and the role of innovations from a perspective of business economics
At the start of this paragraph, the author looks into the difference between invention and innova-tion. Numerous definitions of innovation are to be found in the literature. The difference between invention and innovation is one of the most important areas of confusion. According to Rickards (1985) an invention is a discovery, often a technical discovery. The process of invention does not follow logical and rational pathways and is often associated with the process of creativity. Innovation is a process in which new ideas are applied in practice. So innovation is the commer-cialisation of inventions. Often, innovation is used to indicate the result of the innovation process, the actual product or service which is innovated. In this thesis, we define innovation as the pro-cess of innovating.
Schumpeter (1939) has contributed to the theory on innovation and the role of the entrepreneur. Schumpeter (1939) believed that every significant economic change is caused by an invention. He called this the alfa-innovation phase. In this phase there is a rapid market growth while the invention uses resources in high pace. Inventions are strongly stimulated by investments in research and development. When the market growth decreases, spin offs develop which cause less drastic changes. This is called the beta-innovation phase. The alfa-innovation phase is related to the invention as defined by Rickards (1985). The beta-innovation phase is related to the diffusion of the innovation.
Innovation is the result of both ‘technology push’ and ‘market pull’. Freeman (1996) states that the success of an innovation is determined not only by technological superiority but also by market sensitivity.
According to Schumpeter, the inventor/entrepreneur creates a demand leading to employment and wealth. There is always sufficient supply of entrepreneurship, but this entrepreneurship is often frustrated if there is not enough venture capital available to commercialise all inventions. Casey (in Rothwell, 1981) formulates three main approaches in the theory and analysis of techno-logical change:
1. technology as a competitive force;
2. the company as a creator and assessor of technology;
3. relevant structural definitions of industry and the role of technology in cyclical and struc-tural economic change.
The first development is based on the assumption that the company strives for imperfect competi-tion for its own interest. Technological change is a means for the company to create competitive advantage.
Pinch and Bijker (1987) consider technological development as a cumulation of variation and selec-tion processes. Variaselec-tion results from the work of research and development centers of companies and research institutes.
Selection is reached in two ways, ex-ante and ex-post. Ex-post selection means that the variations are exposed to the selection pressure of the market. Selection takes place after the products and processes are brought to the market. Ex-ante selection means that companies anticipate later selec-tion in the market by adjusting developed products and processes before these are brought to the market. All kinds of socio-institutional factors like policy structure, relation between employers and employees and regulation in the market are also included. For this reason the market can be considered a selection environment.
Abernathy and Utterback (1988) state that the type of innovation in an industry depends on the maturity of this industry. In a young industry product innovations dominate, in a mature industry process innovations dominate, thus, the younger an industry is, the more fundamental the innova-tions are. Fundamental innovainnova-tions refer to breakthrough or radical innovainnova-tions, versus incremen-tal innovations7. This principle is shown in Figure 4-1. This difference is relevant in the light of this
Figure 4-1 Type of innovation versus state of the industry (Abernathy and Utterback, 1988)
In the waste industry, only services and processes exist rather than products The only product innovation relevant to the waste industry is innovation in recycled products as a result of recy-cling processes. For this reason all innovations in the Dutch waste industry are considered to be process innovations for the scope of this thesis.
Utterback introduces the term dominant design. A dominant design is a design that has the prefer-ence of the market. Therefore competitors must use this dominant design if they want to obtain a significant market position. According to White (2003) the dominant design has at least one of the following three features:
1. it overcomes technical obstacles which were a problem with earlier products without creating important new obstacles;
2. It increases the value of potential other innovations in other elements of a product or process; 3. It garantuees expansion in new markets.
Utterback (1994) divides industrial innovation in three phases: the liquid phase, the transitional phase and the specific phase (see Table 4-1).
Table 4-1 Three phases of industrial innovation (Utterback, 1994)
Factor Liquid phase Transitional phase Specific phase Innovation Frequent big product Big process changes through Stepwise improvements in
changes growing demand productivity and quality Source of innovation Pioneers, product users Producers, users Suppliers
Products Several designs, often At least one design stable Not differentiated customised enough for significant standard products
production volume
Production processes Flexibel and inefficient More rigid, changes with Efficient, capital intensive and big steps rigid, high costs for change R&D Focus not specified because Focus on specific product Focus on stepwise production
of high technological features when dominant technologies, emphasis on uncertainty design occurs production technology
Factor Liquid phase Transitional phase Specific phase Installations Multi purpose, skilled Some subprocesses automated, Special purpose, mostly
operating necessary islands of automation automated with control and monitoring Plants Small scale, location close to Multi purpose with specialised Big scale, very specific for
user or source of innovation sections certain products Costs of process changes Low Moderate High
Competition Small in number, strong Big in number but decreasing Small in number, classical variation in market share after dominant design arises oligopoly with stable market
shares Base for competition Functional product Product variance, custom-made Price
performance
Organisational control Informal and undertaking Product groups and task forces Structure, rules and targets Vulnaribility of leaders Imitators and patent More efficient products and Technological innovations
challengers, succesful product higher quality leading to superior
breakthroughs substitutes
Radical and incremental innovations are the result of different processes carried out by companies with different characteristics. Further on in this thesis, we will see that this has implications for policy and regulations when these are meant to stimulate innovations.
Abernathy and Utterback (1988) show that in mature industries which are characterised by high volumes and well defined markets like for example lamps, paper, steel and base chemicals innova-tion has an evoluting character. These industries have a number of features. The product proper-ties are well known. Profit margins are low, production technology is efficient, installation-inten-sive and tailored to one product. Competition is mainly based on price.
Important new services do not follow a gradual development but a revoluationary development which is associated with the identification of a growing demand or new way to fulfill an existing demand. This is a deed of entrepreneurship.
Abbernathy and Utterback find that these innovations share a number of common features. They occur more in companies which are positioned in or in the environment of rich markets, close to scientific institutes like universities and to entrepreneurial financial organisations. Their com-petitive advantage is based on a superior functional performance in stead of lower initial costs. Performance criteria are vague and subject to discussion initially. Often in this phase, users are highly involved in the final design because of their adequate understanding of the performance criteria. It is clear that small, decisive companies with a flexible technological approach and good external communication channels are advantageous because of the diversity of and uncertainties about the performance criteria.
The transition from radical to evolutionary product innovations is usually followed by a capital-ised, controlled and non-innovative specific phase. This forms a threat for the existence of the organisation if the present dominant design no longer meets the requirements of the market and the company has lost the capability for radical innovation. The changes in innovation patterns, production processes, scale and type of production capacity all follow a consistent, predictable route. Following the notions brought forward in chapter 3, it might well be that the Dutch waste is in the specific phase.
Radical innovations do not per definition carry greater commercial value. Gradual innovations often carry equal or even greater commercial value. Big, radical innovations have two types of uncertainties: technological uncertainty and market uncertainty (Rogers, 1995). Because of these uncertainties there is little motivation to invest heavily in research and development. When the industry develops, market uncertainty decreases and bigger investments in research and develop-ment are justified.
Flexible production and mass customisation appear to offer a possibility to escape from the non-innovative specific phase. Japanese car producers succeeded to keep the production costs low while offering a great variety in smaller production runs. A Japanese bicycle producer takes this mass customisation another step further. He produces a specific bike for a customer with a choice from 11 million configurations (model, color, frame size, components) and deliver this bike within ten days through the local bike shop. This mass customisation bears the danger according to Abernathy and Clark (1985) that products with low commercial value are produced with a variety for which there is no demand.
Utterback (1994) postulates that in every industry more than one innovation wave can occur and that these all go through the three phases. Every innovation wave has an early peak for product innovations and a force towards process innovations when product innovations decrease. Every innovation wave is characterised by a peak in the number of competing companies around the moment the dominant design occurs and a decrease of competing companies after this moment. During the second innovation wave in an industry less companies are active than during the first. It is not known whether this number further decreases during following innovation waves. Also speculative is the assumption that the decrease in the number of competing companies during the second innovation wave is caused by the fact that entry barriers are formed by distribution chan-nels and production facilities formed during the first innovation wave.
The conclusion is that innovation is both invention and application and that there are different types of innovation depending on the phase of the industry. From the literature there are indica-tions that the more mature an industry grows, the less radical the innovaindica-tions tend to be.
