The roles of network embeddedness,market incentives,and slack resources in the adoption of clean technologies by firms in developing countries

Worldwide carbon dioxide emissions continue to increase driven by fossil fuel consumption and industrial discharges. Progress on carbon emission reduction requires firms to adopt clean technologies which minimize material and energy consumption. Technological change is particularly required in developing countries, where industrial emissions often lead to chronic urban pollution problems. In this study, we explore the antecedents of clean technology strategy by firms in developing countries. We combine the contingent natural resource-based view with the relational view to examine how network embeddedness, market incentives and slack resources influence adoption of clean technology. The empirical support for our hypotheses comes from data obtained from 342 firms that operated in the carbon-offset market during the years 2007 to 2009. We find that a firm’s relational network structure influences adoption of clean technologies, particularly when market incentives are low. Contrary to one of the hypotheses, the results of our paper suggest a negative relationship between a firm’s slack resources and its clean technology strategy. Our study highlights the benefits of networks in fostering adoption of clean technology in developing countries. Furthermore, we find that high market incentives (carbon price) decrease the probability of clean technology adoption, so adding to the view that firms respond to carbon-offset rules to realize high carbon revenues at the lowest cost.

Key policy insights

• High market incentives (carbon price) decrease the probability that firms in developing countries will adopt clean technology.

• This adds to concerns about the capability of the Clean Development Mechanism to deliver sustainable development.

• Even where market incentives are low, firms in developing countries are more likely to adopt clean technologies when they are embedded in a closed network of connected partners.

• To stimulate adoption of clean technology in developing countries, policy makers should focus on initiatives to facilitate partnerships between organizations operating in the carbon market and create opportunities for knowledge sharing and learning.

• By changing the policy focus to networks of organizations, the carbon market can bring about positive change in terms of shifting the firm behaviour.