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Financing of renewable technologies


Trainee Robert Wuebker’s research team inaugurated a new program of research related to the financing of renewable energy technologies. They were interested in understanding how innovations go from bench to wide adoption, and the role of the capital markets – in particular corporate and venture capital investment – in that process. The prevailing view in the business literature – especially in the venture capital literature – is that investors look at each potential investment in isolation and complete some sophisticated risk/return calculus, using that calculus as the rationale for investment (as professional venture investors are primarily interested in generating returns). Their work builds on insights from other scholars that the motive(s) for venture investors differ (for example, corporate and professional venture capital), that projects are not evaluated in isolation from one another (venture investors often explore new industries by taking tiny investments in them), suggesting that that social and institutional forces along with cognitive bias shape venture capital investment and the relative usefulness of the risk/return calculus. It is no surprise to the layperson that venture investors are, like other people, human. However, financial economics is built on a foundation of assumptions upon which theoretical perspectives have been developed and through which behavior (about markets, and about investment) is “explained” in ex post fashion.

Recent events have called this approach into question in the larger capital markets, and their work contributes to the examination of a more tenable and tractable view of how venture investment works and the ways that we can influence it (beyond policy incentives) to drive the national innovation system in ways that produce breakthrough outcomes. Further, their work is novel in the sustainability realm, which focuses on an entirely different set of assumptions about markets (their failure) and ignores a great deal of research on economic development (in particular new growth theory). Their work stands in contrast to many “scarcity scholars” in that they suggest that venture investment and the capital markets have a significant role to play in the development of breakthrough energy systems, which are required for humanity to resolve its energy and climate challenges. Unlike social theorists and different from incentive-based prize schemes, they argue that built into each meaningful breakthrough – usually conceptualized and developed through programs like the IGERT – is the biggest prize possible, a massive addressable market.

While invention is crucial, moving that breakthrough from the bench to the market is also crucial, and identifying which breakthroughs can be best achieved by developing closer linkages between investors and professional managers and inventors. So, finally, their work also contributes to the engineering world because it highlights the fact that even the best engineering schools remain fundamentally misguided (and, thus, accidentally successful) as to the processes through which this occurs and how best to shape it for society’s benefit.

Address Goals

This management student must understand technology to pursue his research. Hence, the interdisciplinary approach will build on synergistic knowledge to advance crucially needed research and investment in energy, and in particular, renewable energy technologies.