Sectoral and technological systems of environmental innovation : the case of marine scrubber systems

Accepted Manuscript Sectoral and technological systems of environmental innovation: the case of marine scrubber systems Teemu Makkonen, Tommi Inkinen PII: S0959-6526(18)32152-8 DOI: 10.1016/j.jclepro.2018.07.163 Reference: JCLP 13617 To appear in: Journal of Cleaner Production Received Date: 28 November 2017 Accepted Date: 16 July 2018 Please cite this article as: Teemu Makkonen, Tommi Inkinen, Sectoral and technological systems of environmental innovation: the case of marine scrubber systems, Journal of Cleaner Production (2018), doi: 10.1016/j.jclepro.2018.07.163 This is the post print version of the article, which has been published in Journal of Cleaner Production, 2018, Volume 200, 110-121. https://doi.org/10.1016/j.jclepro.2018.07.163 1 ACCEPTED MANUSCRIPT Sectoral and technological systems of environmental innovation: the case of marine scrubber systems TEEMU MAKKONEN Corresponding author Institute for Advanced Social Research, University of Tampere; FI-33014 Tampere, Finland; Tel. +358505099133; [email protected] Department of Business and Economics, University of Southern Denmark; DK-6400 Sønderborg, Denmark TOMMI INKINEN Centre for Maritime Studies, Brahea Centre at the University of Turku; FI-20014 Turku, Finland; Tel: +358400882818; [email protected] Acknowledgements We are thankful for the interviewees for their time and effort as well as to the colleagues at the Institute for Advanced Social Research and to the anonymous reviewers for their constructive comments on improving the paper. 2 ACCEPTED MANUSCRIPT Sectoral and technological systems of environmental innovation: The case of marine scrubber systems ABSTRACT: The maturing literature on innovation has recognized the processes of sectoral and technological systems of innovation as helpful frameworks to analyze environmental innovation – a field whose importance continues to grow amidst contemporary regulatory pressures, for example, on maritime industry and shipping. This paper intertwines these key innovation concepts and applies them to classify and systematize an environmental product innovation: marine scrubber systems. The paper also addresses the linkage between innovation policy and environmental regulation and presents an overall framework to visualize and systematize conceptual connections between sectoral and technological systems of innovation to further develop and manage these complex systems of environmental innovation inducement. The paper applies technological and legal materials depicting the context of maritime scrubber systems as technological responses to more rigid environmental regulation by addressing their implications for market potential and change. The results underline the importance of environmental regulations as the driver of the development of technological innovation systems centered on environmental innovation. KEYWORDS: Environmental innovation; marine scrubber system; maritime industry; sectoral system of innovation; technological system of innovation 1 INTRODUCTION Environmental innovation – defined as “innovations that consist of new or modified processes, practices, systems and products, which benefit the environment and so contribute to environmental sustainability” (Oltra and Saint Jean, 2009: p.567) – are often considered as a response to regulatory pressure induced by policy measures. However, recent studies have suggested that environmental innovation are also engendered by the technological regime of sectors and market demand (Oltra and Saint Jean, 2009). Still, the majority of the literature on environmental innovation from an innovation systems perspective has generally focused on the inducement impact of regulations and other policy measures (Beerepoot and Beerepoot, 2007; Rogge and Hoffmann, 2010) rather than on actual innovation processes (Oltra and Saint Jean, 2009; Galliano and Nadel, 2015). Therefore, much in line with Köhler et al. (2013), this paper adopts an integrated approach for analyzing responses to environmental/innovation policies by addressing how the combination of two (closely related) innovation systems approaches – sectoral systems of innovation (SSIs) and technological systems of innovation (TSIs) (Carlsson and Stankiewicz, 1991; Malerba, 2002) – can contribute to the analysis of environmental innovation. However, this approach goes beyond the traditional focus on policy measures and innovation inducement by incorporating other technological and demand factors affecting sectoral innovation processes and the adoption of new technologies. Marine scrubber systems (MSSs) are utilized here as an example of how to apply the SSI and TSI frameworks for analyzing environmental innovation. MSSs, cleaning units fitted into exhaust pipes of ships to reduce emissions, are thus a fitting example of environmental innovation (or ecoinnovation), in that they match perfectly with the above given definition of environmental (product) innovation (Oltra and Saint Jean, 2009; Makkonen and Repka, 2016). Their production includes, as will be shown in this paper, the interplay between sectoral conditions, markets, and policies grounding their use as an applicable empirical study subject. Their development and current demand can be traced back to the efforts of the maritime sector to comply with recent environmental regulations introducing more stringent emission limits for shipping set in motion by 3 ACCEPTED MANUSCRIPT the International Maritime Organization (IMO) to protect human health and the environment in endangered geographical settings. As stated by Neely (2005), the overreliance on a single concept or framework can impede the empirical and theoretical validity of scientific research, thus creating a need for integrating different approaches. This paper follows that guideline and presents the following goals for itself: 1) bring the TSI and SSI frameworks conceptually closer together to form an overarching heuristic to facilitate the investigation of innovation dynamics in emerging industries that are not well captured with conventional TSI or SSI approaches, and 2) to give an empirical example of how the developed integrated framework can be utilized by mapping the SSI of the maritime industry and particularly the TSI of MSSs; identifying the factors that have led to the development of MSSs; and pinpointing the key processes in the formation of MSS technology. In doing so the paper is answering the call voiced by Oltra and Saint Jean (2009) to investigate environmental innovation more thoroughly and more formally through the coevolution of the building blocks that constitute sectors, and through the evolution of the boundaries between these sectors. This aspiration is in line with various recent innovation system studies (e.g. Coenen and Díaz López, 2010, Coenen et al., 2012; Quitzow, 2015; Stephan et al., 2017), which have argued that, especially in the realm of environmental innovation, such integrated approaches are urgently needed. The paper proceeds as follows. First, a brief overview and a synthesis of the conceptual backgrounds of SSIs and TSIs are given to justify the need for integrated approaches, followed by the description of the employed framework that bridges SSI and TSI perspectives together. Second, the employed empirical approach is outlined and its limitations discussed. Third, the results showing how the TSI of MSSs, induced by regulatory pressures, has evolved through interlinked environmental and innovation policies, technology conditions and market demand to a solution that now offers a viable method for shipping emission abatement are presented. Finally, the paper concludes with a discussion of its most pertinent implications by summing up its empirical, theoretical, and policy relevance. 2 CONCEPTUAL BACKGROUNDS 2.1 Sectoral systems of innovation Observations of the major differences between the patterns of innovative activities in distinct sectors and their similarity across different countries has led to the coining of the concept of SSI. The concept was thoroughly introduced into the literature by Malerba (2002, 2004). In contrast to its closely related geographically delineated counterparts, that is, national systems of innovation (NSIs) and regional systems of innovation (RSIs) (Lundvall, 1992; Cooke, 1992), in this approach sectors are utilized as units of analysis. SSIs have been defined as “a set of new and established products for specific uses and the set of agents carrying out market and non-market interactions for the creation, production and sale of those products” (Malerba, 2002: p.250). Here, following Oltra and Saint Jean (2009) and Faber and Hoppe (2013), SSIs are discussed through the following interlinked themes: agents, interactions, and networks; technological regimes; market demand; and policy conditions. 4 ACCEPTED MANUSCRIPT Agents, interactions, and networks: As stated by Faber and Hoppe (2013: p.631), “any sectoral system analysis involves an overview of the main agents in the sector, including their interactions and formal as well as informal networks.” The basic characteristics of an SSI can thus be described through the agents (firms, universities, financial institutions, government, local authorities, individuals, etc.) involved, their interactions, and the networks that have been formed due to these interactions (Malerba, 2002). The agents can be further divided into primary and secondary agents. Primary agents are the key players of innovation within the sector, that is, (commonly) innovative firms. Secondary agents are supporting organizations such as the government, banks, research institutes, consultancies, and intermediaries (Faber and Hoppe, 2013). Technological regimes: Firms operate within sectors characterized by distinct technological environments, that is, technological regimes, which play a key role in determining their patterns of innovative activities. There are two types of technological regimes: 1) an entrepreneurial regime (characterized by a continuous enlargement of the innovation base through the entry of new innovators) and 2) a routinized regime (characterized by the dominance of a few established continuously innovating firms) (Malerba and Orsenigo, 1997; Oltra and Saint Jean, 2009). Since new technologies can open up opportunities for firms to take advantage of, the discussion related to the role of technological barriers to entry has led Marsili (2002) to the argument that the complexity of the technology (the knowledge base upon which it is based) involved within a sector determines to a large extent the likelihood of the emergence of new actors entering into the sector (the higher the complexity, the higher the entry barriers). The transportation sector, also discussed in this paper, is characterized by high complexity, which thus sets entry-barriers for new firm (centered on ecoinnovation) formation. Market demand: Traditionally, innovation studies have concentrated on supply side dynamics, whereas the demand side of innovation attracted little scholarly attention (Oltra and Saint Jean, 2009). Two notions challenged this passive voice given to market demand: 1) the notion of the emergence of dominant design (Abernathy and Utterback, 1978) and 2) the notion of increasing returns on innovation adoption related to, for example, scale economies in production and technological interrelatedness (Arthur, 1988). It was realized that market demand conditions can potentially lead to a technological monopoly and an era of incremental improvements (Oltra and Saint Jean, 2009). However, new disruptive innovation can displace a dominant technology if there is a willing group of niche consumers adopting and experimenting with new technologies (Malerba et al., 2007). The incentive for firms to develop environmental innovation can thus come from the market through the non-regulatory pressure of “green consumers” (Foster and Green, 2002; Oltra and Saint Jean, 2009). Firms should also consider the market as a potential cooperation partner by integrating users into the development processes of environmental innovation (Wagner, 2009; Carrillo-Hermosilla et al., 2010). Policy conditions: Since technology-push within a sector and market-pull alone do not seem to be strong enough incentives for environmental innovation, public policies aimed at facilitating sustainability (regulatory push/pull effects) are commonly needed (Rennings, 2000). Policies can be aimed at facilitating demand-pull or technology-push conditions of environmental innovation depending on how they are designed (Oltra and Saint Jean, 2009). Demand-pull policy instruments are measures aimed at raising the payoff of successful innovations through activities such as 5 ACCEPTED MANUSCRIPT environmental regulations, standards, and taxes on competing technologies. Technology-push policy instruments are measures targeted at incentivizing innovative activities by reducing the costs of developing environmentally friendly products, services, and processes through, for example, tax credits and direct funding for research and development (R&D) (Nemet, 2009; Makkonen and Repka, 2016). The combinations of these policy instruments define the environmental innovation policy mix that is utilized for promoting sustainable sectoral systems of production and consumption (Oltra and Saint Jean, 2009). This policy mix is influenced by varying geographical scales, since the policies can be designed at local, national, or international levels. It is rather unsurprising that the exact policy mix or individual measures that would be the most effective at producing the best results remain elusive (Costantini et al., 2017). Despite this uncertainty, it is commonly agreed that regulations (and other policy instruments) play an important role in shaping the functioning of SSIs in connection to environmental innovation (Oltra and Saint Jean, 2009; Faber and Hoppe, 2013). 2.2 Technological systems of innovation Distinct from its geographical (RSIs and NSIs) and sectoral (SSIs) counterparts, in TSIs the unit of analysis is a specific technology or product. The concept was coined by Carlsson and Stankiewicz (1991: p.111) and was defined as “a network of agents interacting in a specific economic/industrial area under a particular institutional infrastructure or set of infrastructures and involved in the generation, diffusion, and utilization of technology.” A TSI does not necessarily exist in every arbitrarily chosen field, rather a TSI needs to meet a certain set of conditions. There should be 1) a variety of different actors pursuing different innovation strategies, 2) a certain division of labor between these actors, 3) a variety of (lobbying and classification) institutions, and 4) at least some market transactions (Markard and Truffer, 2008). Hekkert et al. (2007) and Bergek et al. (2008) have introduced practical schemes for evaluating the overall functioning of a TSI, which is impacted by key processes (termed functions) that can be potentially influenced by policy-makers. This “functions approach” has been extensively applied in a wide range of studies of environmental innovation, sustainability, and technological change (e.g. Negro et al., 2008; Suurs and Hekkert, 2009; Foxon et al., 2010; Suurs et al., 2010; Tigabu et al., 2015; Reichardt et al., 2016). The functions approach is employed here as an analytical framework for describing the TSI of MSSs by tracing the following steps: structural components; functional patterns; and policy issues. Structural components: The focus of research on TSIs can be placed on a distinct knowledge field or product (here the emphasis is placed on a product, namely MSSs). Thus, the analysis starts with identifying the actors involved as well as the networks that exist between them. The actors commonly include firms, universities, research institutes, public bodies, etc. Moreover, institutions (through laws and regulations) influence the TSI in question (Jacobsson and Bergek, 2004; Bergek et al., 2008). Functional patterns: For any analysis to go beyond the mere description of the structure of a TSI it is necessary to move on to analyzing its functions (or key processes). These functions include the following (Hekkert et al., 2007; Bergek et al., 2008): 1) knowledge development and diffusion, 2) influence on the direction of search, 3) entrepreneurial activities/experimentation, 4) market formation, 5) legitimation, 6) resource mobilization, and 7) development of positive externalities. 6 ACCEPTED MANUSCRIPT The first function naturally refers to the knowledge base of the TSI (types and sources of knowledge). The second refers to incentives to enter into the sector and the selection between various technological options including beliefs in future growth potential due to regulatory pressures and/or articulation of interest by customers. This function can be fulfilled by a variety of agents such as the government and/or the market. The third function is about probing into the new technology and applications through experimentation, potentially turning new knowledge into concrete actions. The fourth function concerns the evolution of markets and demand for a specific product or technology through three (potential) phases: from an early nursing market for contemporary niche products, through a more voluminous bridging market, and eventually into a dominant mature (or mass) market. The fifth function is a matter of acceptance of the new technology by relevant institutions. The sixth function is related to partnerships and the human and financial capital that the TSI can mobilize. Finally, the development of positive externalities from new firms entering the TSI concerns the emergence of pooled labor markets, emergence of specialized goods and service providers as well as knowledge spillovers. Some authors (e.g. Andreasen and Sovacool, 2015) include benefits that occur for the society as a whole, such as reduced emissions, to this list. These functions are not completely independent from each other, rather they form a sequence of processes where the individual functions coevolve (Hekkert et al., 2007; Bergek et al., 2008). Policy issues: The internal dynamics of a TSI alone are only a partial explanation of its success: inducement and blocking mechanisms influence the functioning of a TSI. For example, a strong belief in the growth potential of a specific technology or a new government policy (such as tax credits or cheap loans) on conducting R&D can act as an incentive that promotes the development of a TSI. In contrast, blocking mechanisms, such as a poorly developed market for a product, can have strong negative impacts (Jacobsson and Bergek, 2004; Negro et al., 2012). Policies should target TSIs by measures that strengthen inducement mechanisms and remove blocking mechanisms (Bergek et al., 2008). 2.3 Conceptual framework: Boundaries of sectoral and technological systems of innovation As discussed by Malerba (2002) and Oltra and Saint Jean (2009) the literature on SSIs should pay close attention to the evolution or transformation of boundaries between sectors. This is particularly relevant for environmental innovation, which can often be a product of combining different technologies present in various distinct sectors (Cooke, 2008). Therefore, when discussing environmental innovation, one commonly studies a field that has combined existing technology from various sectors in an integrative manner. Similarly, TSIs commonly cross sectoral and geographic boundaries (Figure 1) (Markard and Truffer, 2008; Stephan et al., 2017). Therefore, caution is required when setting (definite) sectoral and/or territorial boundaries for TSIs (Bergek et al., 2015). A TSI can be a subsystem of a SSI (a knowledge base which is exclusive to an individual sector) or an amalgamation of several related sectors (a more generic knowledge field involving many sectors) (Bergek et al., 2008; Markard and Truffer, 2008). TSIs can be geographically bounded in a region (RSI) or a nation (NSI) but are more commonly international, or even global, in nature (Binz et al., 2014; Binz and Tuffer, 2017). In fact, Bergek et al. (2015) have noted that definite delineations of TSIs according to, for example, the borders of countries do not follow the actual definition of the concept. 7 ACCEPTED MANUSCRIPT <Figure_1> The different innovation system approaches are, thus, closely intertwined. Therefore, also the two approaches discussed here inevitably overlap. This is evident, for example, when considering the actors and interactions necessary for both SSI and TSI emergence: “agents, interactions and networks” of the SSI approach are conceptually (relatively) similar to “structural components” (i.e. a network of agents) identified in TSI. Moreover, the functional patterns of the TSI approach can be shown to relate to one or more of the three building blocks constituting SSIs, or vice versa (Figure 2). Still, in the literature on environmental innovation it has been quite common to conceptually delineate a theoretical approach that “fits best” to the interest/purposes of the study (Hekkert and Negro, 2009). Here, however, neither the SSI nor the TSI approach is presented as the only suitable tool for analyzing environmental innovation. Contrarily, they are discussed side-by-side in the results section (Section 4) to showcase how these two approaches, rather than being exclusive, can analytically complement each other (dos Santos Silvestre and Dalcol, 2009). <Figure_2> Figure 2 indicates the main connections between the SSI and TSI approaches. Clear cut distinctions are naturally hard to make. For example, public policy could be linked to the other functions of TIS not highlighted in the figure: market formation e.g. by imposing higher taxes for competing technologies, knowledge diffusion e.g. by supporting the implementation of the technology, entrepreneurial activity/experimentation e.g. by supporting start-ups and pilot projects, and development of positive externalities e.g. via educational and training programs. However, for the sake of clarity, here only the most “obvious” connections identified in our empirical case (Section 4) were signaled out and, for example, the role of public policy is largely discussed through its influence on the direction of search (regulatory pressures), legitimation (the acceptance of MSS as an abatement method by relevant institutions) and resource mobilization (the success of the TSI in receiving financial support via public policies). These presented interdependencies between the two approaches function here as an amalgamated framework guiding the analysis of the formation of the TSI of MSSs. 3 SCHEME OF ANALYSIS After scrutinizing alternatives, we decided that the most viable approach, in line with Laaksonen and Mäkinen (2013), for the purposes of this paper (to analyze the interplay between MSS technologies, environmental regulations, technologies, and market demand) was a desk study. The approach combines and applies existing academic literature, documents and data on TSI and SSI concepts together with empirical examples of MSSs (supplemented here with interviews with industry experts). This was accomplished by reviewing documents and existing studies of legislation requirements, MSS properties, and their implications for innovation. Specifically, we gathered and interpreted the relevant material via accessing: 1) The academic literature (search procedures in Scopus and Google Scholar by employing keywords such as “scrubber”, “emission control”, “emission reduction”, “emission regulation”, and “exhaust gas cleaning”) 8 ACCEPTED MANUSCRIPT 2) Web pages and associated documents of relevant industry and classification associations/societies including DNV LG (www.dnvgl.com) and Exhaust Gas Cleaning Systems Association (EGCSA) (www.egcsa.com) 3) Relevant policy documentation by IMO and the European Union (EU) 4) Web pages, annual reports, press releases and associated news of MSS manufacturers (member of EGCSA) 5) Leading industry experts in the field based on interviews and e-mail correspondence with representatives of Finnish MSS manufacturers: Langh Tech (Product Manager, 17.11.2017), Valmet (Senior Manager, 13.12.2017), and Wärtsilä (Senior Advisor, 7.11.2017) These documents and insights give us a coherent picture of the history, milestones, and interplay between the policy conditions, technology, and market demand that has led to the development of the TSI of MSSs. It has to be noted that the commonly identified caveats of case studies apply also here. For instance, it is often stated that case study results are hard to generalize beyond the case addressed and that their objectivity is questionable (Hodkinson and Hodkinson, 2001). However, these “traditional” views have been refuted by scholars, who value the role of case studies as an educational tool for knowledge creation. For example, Flyvbjerg (2006) regards the above-mentioned caveats more as “misunderstandings” and therefore has corrected them by stating that one can often generalize on the basis of a single case and that case study research contains no greater bias towards subjectivity than any other method of scientific inquiry. 4 THE CASE OF MARINE SCRUBBER SYSTEMS 4.1 Backgrounds and feasibility The rationale for combining the domain of legislation into discussion of environmental innovation comes forth from the understanding of public governing organs (national and international) as actors that can, on the one hand, support green technologies and, on the other hand, direct the development of SSIs and TSIs into a more sustainable direction. This very much applies in the case of MSSs, since their “origin” can be traced back to international policy measures. IMO is a specific United Nations organ that regulates global maritime issues and shipping. The agenda of the International Convention for the Prevention of Pollution from Ships (MARPOL) has produced a number of annexes stating guiding regulations on shipping. Air pollution is covered in Annex VI (providing guidelines for the current regulations and the continuous decrease of sulfur content in marine fuels and emissions), which was adopted by IMO in 1997 (marking the start of the discussions on how to meet the restrictions), ratified in 2004 and came into force in 2005. A revised version of Annex VI (permitting MSSs as an abatement method) was adopted in 2008. EU obligated it member states to follow it, either via fuel-based or technology-based compliance, through Directive 2012/33/EU. Since January 1, 2015, ships operating in the four designated Sulphur Emission Control Areas (SECAs) – North American (coasts of Canada and USA), US Caribbean Sea (Puerto Rico and US Virgin Islands), Baltic Sea and North Sea – are expected to reduce their emissions to a limit equivalent to having no more than 0.1% sulfur content in their marine fuel (Figure 3). Globally, the limit will be lowered to 0.5% in 2020. A more stringent 0.1% limit (set in Directive 2016/802/EU) will be implemented in EU-ports. Moreover, since 2016 China has started 9 ACCEPTED MANUSCRIPT 6. Resource mobilization: has been accomplished first via the human capital – that had the knowledge to combine expertise on scrubber technologies to fit the specific needs of shipping – inherent in the MSS manufacturers (technological regime), second via the partnerships of MSS manufacturers and shipping operators to test the first pilot projects (market demand), and third via successful (lobbying) activities to fund the development and testing of MSSs, and their (retro)fitting into vessels (public policy). 7. Development of positive externalities: is most evident in the way that the TSI of MSSs has been able to increase its economic impact – resulting e.g. in positive knowledge spillovers (technological regime) – via increasing demand that has led to the growth of established actors, but also to the emergence of new MSS manufacturers (e.g. in China). 5 CONCLUSIONS This paper has focused on MSSs as an example of environmental innovation by bridging the SSI and TSI frameworks and by mapping the development and evolution of the TSI of MSSs into a feasible method for shipping emission abatement. The main empirical conclusions of the paper can be summarized as follows: For MSSs to emerge as an environmental innovation, existing technology in electric power, clean tech, and manufacturing industries was needed to constitute the technological regime on which product development was based. The demand rose gradually as the date for IMO regulations closed in due to necessity and government support for adopting this technology. However, in the end it can be stated that in the case of MSSs the initial and most powerful impetus for the technology has come from environmental policies restricting sulfur emissions. This created a strong belief in future growth potential for MSSs. The development has been further promoted with policies for supporting MSS manufacturers in their R&D and shipping operators in installing MSSs on their vessels. In short, the existing technological regime and emerging markets played a role in the development of this new technology, but MSSs can mostly be seen as a response to policy measures – as has been commonly the case with environmental innovation (Köhler et al., 2013; Makkonen and Repka, 2016). Thus, IMO regulations paved the way for MSSs to develop into a TSI. The required technology had existed on land for decades, but companies were not willing to take advantage of this technology before the announcement of the (upcoming) IMO regulations. Similarly, there were only a few green consumers willing to test the technology – the demand for MSSs did not really grow until the implementation of IMO regulations was almost at hand. Therefore, the role of policies in the creation of the TSI of MSSs was of pivotal importance. This is likely to be the case with other TSIs centered on environmental innovation. These points bring forth a number of interesting implications. From a theoretical and analytical point of view the relevance of this paper has to do with its efforts in combining TSI and SSI perspectives into a coherent description of the development and evolution of an environmental innovation. As was shown here, taken together these aspects complement each other and function as a useful framework for this type of explorative study design. In terms of policy implications, it can be underlined that, firstly, environmental regulations can induce innovation. Secondly, governmental support for R&D to produce these innovations is extremely important, since market demand alone might not be enough – prior to the enforcement of environmental regulations – to convince manufacturers to develop new environmentally sound technologies. Thirdly, in cases where 16 ACCEPTED MANUSCRIPT innovation is induced by environmental regulations, governmental support is also needed for its adoption and implementation, since the higher initial purchasing prices commonly complicate the assessment of the economic feasibility of environmental innovation, compared to established technologies, leading to resistance to adopt or implement them. It should be guaranteed that the support is significant enough for it to make sense for the customers (in the case of MSSs the underdeveloped market for the technology has been the foremost blocking mechanism of the TSI) to start using the new technologies, rather than choosing other (environmentally inferior) alternatives, abandoning the field, or moving to other regions with less stringent regulations. This paper opened up ways to understand the potential of integrating the SSI and TSI approaches. The empirical parts of the paper rely on a single case. Therefore, in future studies more empirically detailed approaches with both quantitative and qualitative methods are needed. In addition, comparative studies on other TSIs based on environmental innovation potentially broaden our understanding of the complex relationships between national and international regulations, various conceptions of innovation systems, the environment, and the economy. 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Interdependencies between the building blocks of sectoral systems of innovation (SSI) and the functional patterns of technological systems of innovation (TSI). Source: Authors. 22 Figure 3. The geographical and regulatory aspects (sulfur content in bunker fuel) of Sulphur Emission Control Areas (SECAs). Source: Authors; based on data from Makkonen and Repka (2016). 23 Figure 4. Wet and dry marine scrubber systems. Source: Authors; based on data from Bergqvist et al. (2015) and Svaetichin and Inkinen (2017). 24 Figure 5. The network of actors involved in the development and production of marine scrubber systems (MSS): agents, interactions and sectors involved (EU = European Union; IMO = International Maritime Organization; R&D = research and development). Modified from: Karvonen et al. (2016). 25