Heterogenous investors, scale economies & the commercialisation of innovative renewable energy tech

This working paper explores why heterogeneity in the sources of finance matters for innovation outcomes.

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UCL Institute for Innovation and Public Purpose (IIPP) Working Paper Series: IIPP WP 2021/11

Authors:

• Gregor Semieniuk | Assistant Research Professor, Political Economy Research Institute and Department of Economics, University of Massachusetts Amherst, Research Associate, UCL Institute for Innovation and Public Purpose, Lecturer in Economics, Department of Economics, SOAS University of London
• José Alejandro Coronado | Research Fellow in Green Transition Financing, UCL Institute for Innovation and Public Purpose
• Mariana Mazzucato | Director, and Professor in the Economics of Innovation and Public Value, UCL Institute for Innovation and Public Purpose

Reference:

Semieniuk, G., Coronado, J.A. and Mazzucato, M. (2021). Heterogeneous investors, scale economies and the commercialisation of innovative renewable energy technologies. UCL Institute for Innovation and Public Purpose, Working Paper Series (WP 2021/11). Available at: https://www.ucl.ac.uk/bartlett/public-purpose/wp2021-11

Abstract:

Heterogeneity in the sources of finance matters for innovation outcomes. We study how investor types differ in their investment size and thereby affect renewable energy technology commercialization via scale economies. We build a dataset of 44,417 private and 12,366 public investments into nine renewable energy technologies in 83 countries for the years 2004-2017, overlapping with the commercialisation periods of these technologies. We distinguish various investor types and focus on financial investors. Using a hierarchical model, we show that banks and institutional investors make larger and smaller investments respectively than non-financial project developers, with further heterogeneity across technology year clusters. Public investment has a quantitatively important positive effect on private investment size, which is more pronounced for banks than for institutional investors, including abroad through strong international spill-overs. Our results indicate that commercialization outcomes can be impacted by heterogeneous investor types and that public financing elicits scale economies.