Shaping sustainable markets—A conceptual framework illustrated by the case of biogas in Sweden

Highlights

• This paper outlines a conceptual framework that describes the shaping of sustainable markets.

• The framework comprises three market-shaping processes: enabling exchange practices, proving the system and constructing the narrative.

• The framework is illustrated with a case analysis of market-shaping processes for biogas in Sweden.

• The case analysis shows how public and private actors have engaged in a multitude of activities in the market-shaping processes.

• The recursive nature of sustainable market-shaping is highlighted.

Abstract

By merging findings from transition studies with recent literature on market-shaping, this paper outlines a conceptual framework that describes the shaping of sustainable markets. The framework comprises three critical processes: enabling exchange practices, proving the system and constructing the narrative. Individually, these processes generate different kinds of value – traded, demonstrated and expected value – and the value output from each process serves as input to the other two processes. Hence the value streams link the processes together. We illustrate the framework by analyzing market-shaping processes for biogas in Sweden. The case analysis shows how public and private actors have engaged in a multitude of activities that have built up the market-shaping processes. The analysis highlights the recursive nature of sustainable market-shaping, showing how key actors must repeatedly respond to tensions resulting from growth and aspirations of growth.

Introduction

Transition studies often refer to strategic niche management (SNM) and the technological innovation systems (TIS) approach when analyzing how renewable and low-carbon technologies can reach a market. SNM points towards niches as important protective spaces that facilitate alignment between nascent technologies and societal expectations (Kemp et al., 1998; Schot and Geels, 2007, 2008). Jacobsson and Bergek (2004) analyzed the emergence of technological systems for renewable energy, distinguishing between an early formative phase and a subsequent phase characterized by positive feedback and growth. They claimed that niches that facilitate market entry are important to proceed from the formative phase. In a later elaboration of the TIS approach, they described market formation as a process consisting of “three phases with quite distinct features”: nursing markets (niches), bridging markets, and mass markets (Bergek et al., 2008a, p. 416). However, the TIS approach has attracted criticism for paying insufficient attention to agency and the socio-political struggles associated with transitions. According to Kern (2015), this lack of attention has limited the ‘explanatory value of the approach. In response, Markard et al. (2015, p. 82) “agree with Kern (2015) that more emphasis may be placed on politics in analyses of TIS dynamics”.

Marketing scholars agree with sustainability transition scholars on the need to address agency and politics in market analyses. Whereas markets historically have been seen as pre-existing arenas waiting to be exploited by firms, recent marketing literature perceive markets as dynamic systems, which are constantly shaped by a variety of actors (Mele et al., 2015; Harrison and Kjellberg, 2010; Storbacka and Nenonen, 2015). According to Ulkuniemi et al. (2015, p. 55) “markets can be examined through actors … and their actions”. This literature suggests that actors shape markets through their attempts to influence other actors (Kindström et al., 2018; Nenonen et al., 2019). These attempts involve different activities, ranging from traditional promotion to activities that involve entire systems, changing the institutional and technical structures that restrict and regulate market behaviors (Kjellberg and Helgesson, 2007; Mele et al., 2015).

According to Mazzucato (2016), governments are lead actors in the shaping of sustainable markets. She claims that there is a need for new types of public policies to address sustainability transitions; rather than remedying system failures, governments must act to shape markets (Mazzucato and Semieniuk, 2017). Mazzucato’s perspective is that of the national state, arguing that ‘the entrepreneurial state’ can shape markets through public investments (Mazzucato, 2013). However, Mackenzie (2009) discussed how the politics of market-shaping go beyond the entrepreneurial state and involve what Beck (1997) referred to as ‘subpolitics’. Multiple actors engage in subpolitics outside and beyond the representative institutions of the political system of nation states. For example, Doganova and Karnoe (2015) discussed how collaborations of scientists, corporations, and other organizations play an increasing role in markets for clean technologies, as these markets are situated in between political, economic, and scientific issues. Hence, in order to analyze sustainable markets, there is a need to consider a broad variety of actors and their activities (cf. Mortensen, 2018; Meadowcroft, 2011; Smith and Raven, 2012; Geels et al., 2016).

Even though transition researchers and market-shaping researchers agree on the need to address various kinds of actors, these respective research areas tend to take different perspectives. Whereas most transition studies have been conducted on a meso-level (Köhler et al., 2019), market-shaping studies have often taken the perspective of the focal business firm (e.g. Jaworski et al., 2000; Kindström et al., 2018). The differing perspectives result in diverse ways of attributing agency and providing advice. Whereas transition approaches such as TIS and SNM primarily have been outlined to give policy implications (e.g. Bergek et al., 2008a, 2008b; Hekkert et al., 2007; Schot and Geels, 2008), market-shaping research focuses on implications for business management (e.g. Kindström et al., 2018; Nenonen et al., 2019; Ulkuniemi et al., 2015). Still, transition scholars agree that businesses and firms play important roles in sustainability transitions (Köhler et al., 2019). Hence, these two fields of research can offer useful complementary perspectives.

By integrating concepts from recent market-shaping literature with insights from transition studies, this paper outlines a conceptual framework that advances an understanding of the shaping of sustainable markets. The framework comprises three critical market-shaping processes: enabling exchange practices, proving the system, and constructing the narrative. These processes generate different kinds of value and their respective value streams link the processes together. We illustrate the framework by analyzing market-shaping processes for biogas in Sweden. In terms of biogas, Sweden stands out from other European countries in its preference to produce upgraded biogas (often referred to as biomethane) and use it as a vehicle fuel. In 2017, 65 percent of the nationally produced biogas was upgraded and used in such applications; no other European country comes close to this (EC, 2017). An important explanation is the consistent support through market-stimulating policies, which are quite different from most other European countries. We base the case study on data from the early 1990s to 2019, with a focus on the last decade, a period that has been marked by growth as well as expectations of considerable future growth. By studying how a range of public and private actors have engaged in a variety of activities, the paper addresses the following question: How are sustainable markets being shaped?

Following this introduction, the paper proceeds with a conceptual section that presents a market-shaping framework. This is followed by a methods section where we explain the research design. The subsequent section illustrates the framework by means of the case analysis. A discussion section then summarizes the lessons of the case study and a concluding section condenses the main conceptual findings and implications.