(General trend: moving from tax driven financing to other types of lower cost financing)
The knowledge associated with project development and EPC primarily has to do with procedures (e.g., how to obtain financing, how to navigate contracting, permitting, and relevant regulations, etc.), rather than the products and processes of a physical technology (e.g., compare to Knowledge Conditions for wind turbines). However, the same three facets of knowledge (i.e., absorptive capacity, knowledge creation, knowledge spillover) can still reveal insights and research gaps regarding project development and EPC. Of interest are such issues as: do project development and EPC firms act to protect the knowledge they generate, and if so, what mechanisms do they use? Below, we review our working definition of these knowledge categories, then discuss how they apply to the specific case of project development and EPC; in cases where we do not find evidence of related research in the literature, we briefly outline how these topics could be addressed in our framework. Due to the somewhat unconventional application of innovation terminology to this industry and the nebulous nature of the types of knowledge under discussion, interviews with project development and EPC firms may be the best way to learn about the state of knowledge in this industry.
Knowledge as a Resource – Absorptive Capacity
Absorptive capacity (ACAP) refers to the conditions that allow firms to incorporate outside innovations. A popular metric of a firm’s ACAP is research and development (R&D) input (e.g., the amount of money or share of revenue a firm devotes to R&D). Beyond simply increasing R&D input, ACAP also depends on whether or not a firm has continuously invested in R&D. Employee education level (i.e., share of employees with higher education) is associated with ACAP, and diversity of backgrounds among R&D personnel can help an organization maximize “novel associations and linkages” (Taylor et al 2013). Organizational structure and knowledge management culture within a firm, as well as the type of knowledge to be learned externally (e.g., intra- versus inter-industry; science-based; private-to-public or public-to-private sector) also impact a firm’s ACAP (Schmidt, 2010).
In the case of an industry like project development and EPC, traditionally defined R&D generally will not apply. However, these companies will still make investments into relevant knowledge capacity. Without the R&D metric, case studies of, for example, firm organizational structure and employee recruitment for key positions, may be necessary to understand ACAP within this sector.
Knowledge Creation: Patents, Papers, Products, and Processes
Generally, a firm’s R&D input has a strong correlation to the number of patents it generates. Using the number of patents generated as a proxy for knowledge creation is an imperfect yet useful way to measure innovation. Other similar indicators include publications, licenses, and tacit knowledge “know-how.” Using International Patent Classification (IPC) classes, information on patents can be found in numerous patent search databases including the United States Patent and Trademark Office (USPTO), the European Patent Office (EPO), Derwent World Patents Index, World Intellectual Property Organization, and Google Patents, etc. In the case of project development and EPC, much of the knowledge generated within a firm is tacit (see below) and not patentable in the same way that technological innovations can be. However, intellectual property (e.g., computer program to streamline contracts) may be developed within firms and could potentially be protected through patent or copyright.
Bibliometric analysis applies quantitative and statistical methods to study trends in the quantity and quality of published materials (e.g., journal articles); it includes authorship, citation, and journal analysis, as well as analysis of publication impact. Bibliometric analysis can be used to track trends in publication regarding renewable energy, including tendency to discuss specific topics and technologies, as well as any changes in the primary geographic sources of publication. While we did not identify any existing bibliometric analyses regarding project development or EPC knowledge, industry and academic literature could be reviewed to follow the discussion of, for example, utility-scale wind project financing mechanisms.
Knowledge spillover is hard to measure because it tends to be less tangible or readily observable than other innovation metrics. Spillover can be considered between companies, between public and private institutions, and across geographies. Firms often aim to appropriate the returns of innovation (i.e., prevent knowledge spillover) through patents or secrecy. Backward and forward citation of patents can reveal connections between the knowledge imbedded in technologies; backward citation refers to patents cited by the patent of interest, while forward citation refers to patents citing the patent of interest.
Knowledge can also spread as teams collaborate on research and publication. Network analysis, the characterization and investigation of social structures through graphs of nodes (e.g., people, things) and linkages (e.g., relationships, interactions), can be used to explore the connections between different groups of researchers involved in the same field of study. In the case of project development and EPC, such things as attendance of industry conferences or publication in the special topic issues of trade journals could potentially reveal key interactions between industry players. Other relationships of interest include pairings of project development and EPC firms, and the degree to which certain developers work with only a small number of EPCs versus a variety of them, and vice versa. Among those firms with many partners, an EPC may be able to spread knowledge between two project developers or a project developer may spread knowledge between two EPCs.
Tacit knowledge is a primary source of research spillovers because this type of knowledge is embodied in the skills of the firm’s employees. Informal exchanges between researchers and job turnover between firms are channels through which tacit knowledge flows from one firm to the other (Kaiser, 2002). Indicators such as number of R&D personnel and innovation expenditure could be considered a proxy for tacit knowledge transfer, although the validity of this proxy will depend on the type of tacit knowledge to be transferred. Generally, intrafirm transfer modes involving a high level of direct human interaction (e.g., joint ventures, international research centers) are more effective than so-called arms-length transfer mechanisms.