Innovation Policy: The Sailing Ship Effect and its Potential Influence on Energy Transitions and Policy

Peter Pearson, Imperial College

The (contested) hypothesis of the Sailing Ship Effect (hereafter SSE) suggests that for some technologies the advent of a new and competing technology may in some situations stimulate innovative responses (e.g. ‘in the 50 years after the introduction of the steam ship, sailing ships made more improvements than they had in the previous 300 years. Ward, “The Sailing Ship Effect”.’ www.thecis.ca/primer/sailing.htm, and it has been suggested that the response of gas lighting to the development of the incandescent lamp is another examples).

SSEs could be significant for transitions to more efficient lower-carbon energy systems, since if there were substantial effects:

• §  The penetration of  new technologies would be retarded by the increased (price/quality) competitiveness of the incumbent technologies
• §  Thus slowing the newcomers’ sales and their journeys down their experience curves (as they chase the incumbents’ experience curves)
• §  Reducing the newcomers’ rates of penetration below what they would otherwise have been
• §  And substantially increasing the levels of subsidies that might be required to help them reach price competitiveness.

This paper proposes to explore the history of the SSE, the theory behind it, the empirical claims for its existence and non-existence, and its potential relevance for ongoing debates about policies to stimulate low-carbon technologies.