Eindhoven University of Technology MASTER Bounded by rules ... · The graduation project was...

Eindhoven University of Technology

MASTER

Bounded by rules and regulations, or an opportunity to expand?arrange a (green) business model to benefit from an innovative market given environmentalrules and regulations

Huis in 't Veld, B.P.

Award date:2016

Link to publication

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https://research.tue.nl/en/studentthesis/bounded-by-rules-and-regulations-or-an-opportunity-to-expand(6348ef19-dd45-4a91-a6b2-e9346823614c).html

Boundedbyrulesandregulations,oranopportunitytoexpand?

Arrangea(green)businessmodeltobenefitfromaninnovativemarketgivenenvironmentalrulesandregulations

by

BasHuisin’tVeld

XX/07/2016

Student: B.P.Huisin‘tVeld,0720552TU/e1stsupervisor: S.A.M.Dolmans/B.WalraveTU/e2ndsupervisor: K.S.PodoynitsynaRHMarineNLsupervisor: F.J.M.MeijsRHMarineNLsupervisor: W.vanderPennen

Arrangeagreenbusinessmodeltobenefitfromaninnovativemarketgivenenvironmentalrulesandregulations

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EindhovenUniversityofTechnologyDepartmentInnovation,TechnologyEntrepreneurship,andMarketing(ITEM)InnovationManagement

Subjectheadings: innovation,businessmodel,sustainability,greenbusinessmodel,environmentalrulesandregulations,electricbussesindustry,ferryindustry


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AbstractIn this report the influenceof environmental rules and regulations on thebusinessmodel havebeenstudied. Due to the increased interest in global warming and environment, environmental rules andregulations are introduced or become stricter than before. A transition towards a more sustainablemethodofoperatinghasbeencreated,meaningthatthebusinessmodelbehindproductsandservicesalsofacenecessarychanges.Acasestudyhasbeenconductedinthefieldofpublictransportation,thetransition from regular diesel busses towards electric busses in particular. The results show that thecomplete businessmodel behind regular dieselmodel has been influencedwith the exceptionof thebusinessmodelelements ‘customersegments’and ‘distributionchannels’.Thesalesofelectricbussesrequirenew insights,new(additional)activities,and theestablishmentofnewrelationshipswithnewpartners. Customer relationships are intensified and the value proposition has a new focus (zeroemission).


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PrefaceThismasterthesisistheresultofmygraduationprojectforthedegreeofMasterofScienceinInnovationManagementattheEindhovenUniversityofTechnology(TU/e).ThegraduationprojectwascarriedoutduringaninternshipatRHMarineNL,asystemintegratoronthemaritimemarket.

Iwouldliketothankafewpeople,becausethecompletionofthismasterthesiswouldnothavebeenpossible without the support of a number of people. First, my thanks go to my first supervisor atEindhovenUniversityofTechnology,SharonDolmans.Sheprovidedmewithvaluableinputandusefulfeedback,butalsostimulatedmetoenhanceacriticalapproachtowardsmyownwork.AttheendofthemasterthesisprojectshewasreplacedbyBobWalrave,whoIwouldliketothankaswellforhisflexibilityandfeedback.Second,IwouldliketothankKseniaPodoynitsnynaforherroleassecondsupervisor.Withherbackgroundandresearchfieldsheprovidedmewithsupportivefeedbackonmyliteratureframeworkaswellasthemasterthesisitself.Third,IamgratefultomycompanysupervisorFloorMeijs.ShegavemethepossibilitytograduateatRHMarineNLandwithinthemaritimemarket,andgavemetheguidanceonmomentswhenIneededitthemost.Fourth,IwouldliketothankWaltervanderPennenforhisroleassupervisorinthelastphaseofmymasterthesis.WithexcitementIlookbackonmyexperiencesatRHMarineNLandIamalsothankfultoallcolleaguesatRHMarineNLfortheircooperationandtheirsupport.

LastbutdefinitelynotleastIwouldliketothankmyfamilyandfriendsfortheirsupportduringmymasterthesisprojectandtheBachelorandMasteringeneral.

BasHuisin‘tVeld

Oosterhout,Rotterdam,July2016


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ManagementsummaryInnovations are an important factor for business success, but their importance has not always beenacknowledged in the past. Some literature argues that innovations are the most important revenuestreamsfororganizationsandthattheyshouldhavetheattentiontheydeserve.Incombinationwiththeincreased interest in global warming and environment, a transition towards the development ofsustainableinnovationscanbeidentified.Thedevelopmentofsustainableinnovationsisalsotheresultoftheintroductionofenvironmentalrulesandregulations,whichsetspecificboundariesfororganizationstooperatewithin.

In this research the influenceofenvironmental rulesandregulationson thebusinessmodelhasbeenstudied. Organizations can only benefit from the regulatory regime if they are able to integrate theregulatoryregimeintothebusinessmodel,butmostorganizationshavenoideahowtheirbusinessmodelis influenced by the environmental rules and regulations. This researchwill try to close this gap andprovidenewinsights inthemechanismthat iscalledrulesandregulations.Theresearchquestionthatfollowsfromabovementionedgap:

Howshouldanorganizationarrangeits(green)businessmodeltobenefitfromaninnovativemarketgivenenvironmentalrulesandregulations?

LiteratureframeworkThebusinessmodelusedinthisresearchisdescribedbyOsterwalderandPigneur(2010),whostatethatthebusinessmodeldescribeshowanorganizationcreates,delivers,andcapturesvalue.ThisdescriptioniscomplementedwiththedefinitionofthebusinessmodelbyMoris,SchindehutteandAllen(2005),whostatethat“Abusinessmodelisaconciserepresentationofhowaninterrelatedsetofdecisionvariablesin the areas of venture strategy, architecture, and economics are addressed to create sustainablecompetitive advantage in defined markets” (p.727). The business model consists of four maincomponents,knownasthevalueproposition,thecustomerinterface,thesupplychain,andthefinancialmodel(Morris,Schindehutte,&Allen,2005;Boons&Lüdeke-Freund,2013).

An increased interest in global warming has led to an increased interest in sustainable innovations.Successful commercialization of innovations depends on a good business model, however thecommercialization of sustainable innovations is evenmore complex and therefore a regular businessmodeldoesnotsuitanymore.Theregularbusinessmodelshouldbereplacedbyagreenbusinessmodel,which involves three types of relationships between the organization and its stakeholders: socialrelationships, environmental relationships, and economic relationships. These relationships are fullyintegratedthroughthewholemodelandinfluenceallthedifferentelements.

Several external factors influence the greenbusinessmodel and the commercializationof sustainableinnovations.Althoughallthesefactorshavetobetakenintoaccountwhendesigningthebusinessmodel,theexistenceofenvironmentalrulesandregulationshastobeseriouslyconsideredasimportantthemewithinthebusinessmodel.Ithasaseriouseffectontheorganization’sinnovationcapacityanditsgreen


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businessmodel.Whilerulesandregulationsmightbepositivetoanorganization,sinceitforceshertoinnovate,itcanalsobenegative,becauseitlimitsthecompanyandincreasesR&Dexpenditures.

Asalreadystated,theimportanceofthebusinessmodelcannotbeunderestimated.Rulesandregulationsinfluencetheelementsofthebusinessmodelaswell,thevaluepropositiontostartwith.Thestrategychosenbytheorganizationtodealwithrulesandregulationsisthemaininputforachangewithinthevalueproposition.Howthevaluepropositionisinfluenceddependsonthetypeofstrategy,forexamplethe stretch-and-transform strategy. An example that has been given by Huijben, Verbong, andPodoynitsyna(2016)isthepossibilityforresidentsinFlanderstospreadtheinvoiceovertwoyears,sothis isanessentialchangewithinthevaluepropositiontothecustomer.Anotherelementthatcanbeinfluencedbyrulesandregulationsispartofthecustomerinterface,knownaschannelsordistributionchannels. If the rules and regulation forces organization to becomemore sustainable, other channelsmightneedtobeusedtodelivervaluetothecustomer.Oldchannelsdonotsuitanymore,sincethesemightbenotsustainableenough.

Keypartnersandkeyactivitiescanbeinfluencedaswellasaresultofenvironmentalrulesandregulations.The strategy to intensify the communication with governments or agencies led to a situation thatgovernments or agencies might become key partners within the chain. The communication andcooperationwith them logically results in a key activity for the organization and her employees. Thestrategyofanorganizationhowtodealwith rulesandregulation isalso reflectedwithin the financialmodel.Mainstreamrulesandregulationsresultinincreasedcosts,definitelywhentheorganizationstrivesto fightagainst it insteadofusinga fit-and-formstrategy.Actingwithinaniche ispositivetowardsanorganization’s revenue, since it shields the innovations against mainstream selection pressures. Thepossibleexistenceofgovernmentalgrantsisattractivetoanorganizationaswell,sinceitincreasestherevenuestream.

Methodology

Results

Solutiondesign

Conclusionanddiscussion


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TableofContentsListoffigures................................................................................................................................................4

Listoftables.................................................................................................................................................4

1.Introduction.............................................................................................................................................5

1.1Empiricalcontext........................................................................................................................5

1.2Researchquestion......................................................................................................................6

2.Literaturereview......................................................................................................................................7

2.1Introduction................................................................................................................................7

2.1.1Graphicaloverviewframework.......................................................................................8

2.2Sustainableinnovation...............................................................................................................9

2.2.1Categorizationofsustainableinnovations......................................................................9

2.2.2Adoptionofsustainableinnovations.............................................................................10

2.3Businessmodelsandsustainableinnovation...........................................................................12

2.3.1Businessmodel..............................................................................................................12

2.3.2Greenbusinessmodel...................................................................................................14

2.4Environmentalrulesandregulations.......................................................................................17

2.4.1Introductionofenvironmentalrulesandregulations...................................................17

2.4.2Innovationasaresultofenvironmentalrulesandregulations.....................................18

2.4.3Effectsofrulesandregulationsontheorganization’sinnovationcapacity..................18

2.4.4Effectsofrulesandregulationsontheorganization’sbusinessmodel........................22

2.4.5Needforrulesandregulations......................................................................................24

2.5Conclusion................................................................................................................................26

3.Methodology..........................................................................................................................................28

3.1Datacollection..........................................................................................................................29

3.1.1Externaldatacollection.................................................................................................29

3.1.2Internaldatacollection..................................................................................................31

3.2Dataanalysis.............................................................................................................................32

3.2.1Casestudyanalysis........................................................................................................32

3.2.2Internalanalysis.............................................................................................................33

3.2.3Casestudyversusinternalanalysis...............................................................................33


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4.Results....................................................................................................................................................34

4.1Casestudyresults.....................................................................................................................34

4.1.1Generaldescriptionofthemarketmechanism.............................................................34

4.1.2Environmentalrulesandregulations............................................................................34

4.1.3Influenceofenvironmentalrulesandregulationsonthebusinessmodel...................34

4.1.4Influenceofenvironmentalrulesandregulationsontheenduser..............................41

4.1.5Graphicaloverview........................................................................................................44

4.2Internalanalysis........................................................................................................................45

4.2.1Generaldescriptionofmarketmechanism...................................................................45


4.2.3Currentbusinessmodelferries.....................................................................................46

5.Solutiondesign.......................................................................................................................................49

5.1Casestudyversusinternalanalysis..........................................................................................49


5.1.2Valueproposition..........................................................................................................49

5.1.3Customerinterface........................................................................................................50

5.1.4Supplychain..................................................................................................................51

5.1.5Financialmodel.............................................................................................................51

5.2Businessmodeldesign.............................................................................................................52

5.2.1Valuepropositiondesign...............................................................................................52

5.2.2Customerinterfacedesign............................................................................................53

5.2.3Supplychaindesign.......................................................................................................54

5.2.4Financialmodeldesign..................................................................................................55

6.Discussion...............................................................................................................................................56

6.1Theoreticalcontribution...........................................................................................................56

6.2Practicalcontribution...............................................................................................................58

6.3Limitationsandfutureresearch...............................................................................................58

7.Conclusion..............................................................................................................................................60

Bibliography...............................................................................................................................................61

Appendix....................................................................................................................................................67

AppendixA:Additionalliteratureoninnovation...........................................................................67


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AppendixA1:Idea,invention,andinnovation.......................................................................67

AppendixA2:Formsofinnovation.........................................................................................67

AppendixA3:Typesofinnovation..........................................................................................67

AppendixA4:Predictorsforinnovation.................................................................................69

AppendixA5:Barriersforinnovation.....................................................................................70

AppendixB:Interviewprotocol......................................................................................................71

AppendixB1:Interviewprotocolelectricbusses(producer).................................................71

AppendixB2:Interviewprotocolelectricbusses(user).........................................................72

AppendixB3:InterviewprotocolRHMarineNL.....................................................................73

AppendixC:Interviewswithproducers.........................................................................................75

AppendixC1:InterviewWalterLuijten..................................................................................75

AppendixC2:InterviewMennoKleingeld..............................................................................79

AppendixC3:InterviewAlexdeJong.....................................................................................84

AppendixC4:InterviewFransKustermans.............................................................................89

AppendixD:Interviewswithusers.................................................................................................94

AppendixD1:InterviewGertNaber.......................................................................................94

AppendixD2:InterviewErwinBrakenhoff.............................................................................97

AppendixE:Internalinterviews...................................................................................................102

AppendixE1:InterviewWaltervanderPennen..................................................................102

AppendixE2:InterviewDouwevanderMeer......................................................................105

AppendixF:Codinginterviews.....................................................................................................109

AppendixF1:Codinginterviewsproducers..........................................................................109

AppendixF2:Codinginterviewsusers..................................................................................114

AppendixF3:Codinginterviewsproducers..........................................................................116

AppendixG:Solutiondesign........................................................................................................119


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ListoffiguresFigure1:Graphicaloverviewframework......................................................................................................................8Figure2:Adoptercategories(Rogers,2003)...............................................................................................................10Figure3:Businessmodelcanvas(Osterwalder&Pigneur,2010)...............................................................................12Figure4:Factorsoforganizationalchange(Boons&Lüdeke-Freund,2013)..............................................................15Figure6:Technologypushvs.marketpull(Debnath,2015).......................................................................................18Figure7:Innovationincentivesunderrulesandregulations(Palmer,Oates,&Portney,1995)................................21Figure8:Influenceofrulesandregulationsonthebusinessmodel(Huijben,Verbong,&Podoynitsyna,2016)......23Figure9:Reflectiveandregulativecycle.....................................................................................................................28Figure10:Graphicaloverviewresultselectricbussesindustry..................................................................................45Figure11:Trianglerelationshiponferrymarket........................................................................................................46Figure12:Idea,inventionandinnovation(Stein,2012).............................................................................................67

ListoftablesTable1:DistributionofsustainableinnovationsbySchumpeterianview(Hellström,2007).....................................10Table2:Environmentalproductpolicyinstrumentsinvariouscountries(Li&Geiser,2005)....................................17Table3:RegulationinaSWOTanalysis(Debnath,2015)............................................................................................19Table4:Continuousinnovationthroughrulesandregulations(Debnath,2015).......................................................20Table5:Strategiesandbusinessmodelcomponents.................................................................................................24Table6:Organizationsandtheirrole..........................................................................................................................30Table7:Intervieweesandtheirfunction(external)....................................................................................................30Table8:Intervieweesandtheirfunction(internal)....................................................................................................32Table9:Similaritiesanddifferencesbetweenproducers...........................................................................................38Table10:Similaritiesanddifferencesbetweenproducers.........................................................................................42Table11:Typesofinnovation(Byers,Dorf,&Nelson,2011).....................................................................................68Table12:Codinginterviewsproducers.....................................................................................................................109Table13:Codinginterviewsusers.............................................................................................................................114Table14:Codinginternalinterviews.........................................................................................................................116Table15:Transferofcasestudyfindingstothehybridferrymarket.......................................................................119


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1. IntroductionThe importance of innovation has been underestimated in the past, but the view on innovations iscurrentlychanging (Fagerberg,2003).Some literatureargues that innovationsare themost importantrevenuestreamsfororganizationsandthattheyshouldhavetheattentiontheydeserve(DiBenedetto,1999).Innovationsmeetneworchangedcustomer’sdemandsandarethekeyfactorforbusinesssuccess(Hurley&Hult,1998).Althoughmostorganizationsareabletoinnovate,fromincrementalinnovationstoradicalinnovations,theymightbethreatenedbyrulesandregulations.Theserulesandregulationscreatecertainboundarieswhereorganizationshavetooperatewithin.

Duetotheincreasedinterestinglobalwarmingandenvironment,environmentalrulesandregulationsare introduced or become stricter than before (European Commission, 2010; Debnath, 2015). Fororganizationsitmeansthatasituationhasbeencreatedthattheycanopposetheregulations,thattheycancomplywiththeregulations,orthatcanuseitfortheirownbenefit.Mostorganizationsarenot(yet)able to integrate those environmental rules and regulations into the business model and outpacecompetitors(Debnath,2015).Forbusinesssuccessthechallengeistointegratetheenvironmentalrulesandregulationsandmaybeevenbenefitfromit.

1.1 EmpiricalcontextThecontextinwhichtheresearchwillbeconductedisthemaritimesector,atRHMarineNLtobespecific.RHMarineNLisoneofthekeyplayersonthemaritimemarket,operatingasafull-serviceproviderandsystem integrator of tailor-made, innovative and sustainable technology solutions. RH Marine NL isspecialized in automation (bridge and engine room), propulsion systems, power generation anddistribution, and HVAC (heating, ventilation and air conditioning). Their headquarter is based inRotterdam. They have acquired a good export position in the global market, especially for hybridsolutions,becauseDutchknowledgeisleadinginthemaritimemarket.(ImtechMarine,2015).InnovationandR&Dplayanimportantroleinthemaritimesector,aswecanconcludefromthefollowingquote(vanderAa,etal.,2014):

“TheDutchmaritime sector has a strongposition in theworld as a result of the entrepreneurial andinnovative capabilities of companies within this sector. The R&D investment of the sector is 3,9%additionalvalue,whichismuchhigherthantheaverage2,0%ofthegrossdomesticproduct(GDP)(2012,numbers CBS). Thismeans that themaritime sector is largely above the level that is targeted by theEuropeanCommittee,namely3,0%ofGDP,andbytheDutchgovernment,namely2,5%ofGDP.”(p.19)

RHMarineNLalsofocusesoncontinuouslyimprovingtheirproductsanddevelopinginnovationstomeet(new)demandandtogainagoodmarketposition. IncombinationwiththenewandstricteremissionrulesandregulationsfromtheEuropeanCommittee,thishasledtothenewmarketopportunityofhybridferries (European Committee, 2010). These hybrid ferries are less noisy, more energy efficient andproducelessemissions.TwohybridferriesarealreadyoperatingforCaledonianMaritimeAssetsLtdinScotland,athirdferryisunderconstruction(CaledonianMaritimeAssetsLtd,2015).Thesethreeferries


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functionasapilotproject,andthefirstresultsarepositivewithrespecttoemissionreductionandfuelsavings.

1.2 ResearchquestionIn this research the influenceofenvironmental rulesandregulationson thebusinessmodelhasbeenassessed.Environmentalrulesandregulationsforceorganizationstoadapttheirbusinesstocomplywiththese regulations,whilemaximizingprofitorcustomersatisfaction.Althoughenvironmental rulesandregulationspushorganizationsinacertaindirection,mostorganizationshavenoideahowtheirbusinessisdirectlyinfluenced(Debnath,2015).Therefore,itisunclearhoworganizationshavetodealwithrulesandregulationswhichinfluencethemarket.Assuchthecentralresearchquestionofthisresearchisasfollows:

Howshouldanorganizationarrangeitsgreenbusinessmodeltobenefitfromaninnovativemarketgivenenvironmentalrulesandregulations?

Thisresearchwilltrytoclosethisgapandprovidenewinsightsinthemechanismthatiscalledrulesandregulations.


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2. Literaturereview

2.1 IntroductionAccording to research conducted by the Product Design andMarketing Association (PDMA), the bestperforming companies on themarket focus on innovation and the introduction of new products (DiBenedetto,1999).Althoughmostorganizationsspendseriousresourcestocreateaninnovativecultureand environment, the introduction of innovations to themarket is not always successful (RogersM.,2004). An increased interest in global warming has led to an increased interest in environmentaleconomics,sustainabledevelopment,andcorporatesocialresponsibility.Innovationsaremoreandmorefocused on sustainability, however sustainable development ismore complicated than an innovationwithoutasustainablebase.Fortheorganizationitiscrucialtounderstandwhatsocietyexpects,andinreturnexpressingwhattheorganizationstandsfor.Theorganizationshouldalsobuildthecapacitytoactsustainable and check the progress, by setting realistic targets andmeasure these during the wholeprocess(Dearing,2000).

Successful commercializationof inventions into innovationsdependsonmanydifferentelements (seeAppendixA1),howeverareliablebusinessmodelfortheinventionisessential.Withoutagoodbusinessmodel the successofan innovation is seriously threatened (Osterwalder&Pigneur,2010).Asalreadystated, the trend to sustainable innovation becomesmore andmore important, but some literatureargues that when the innovation is related to sustainability, a regular business model does not suitanymore. The drivers behind sustainable innovation are usually known, however less knowledge isavailablehowsustainable innovationscanbe realized (Boons,Montalvo,Quist,&Wagner,2013).Theregular business model should be replaced by a green business model, which consists of the sameelements as the regularbusinessmodel, but it incorporates three typesof relationshipsbetween theorganization and its stakeholders: social relationships, environmental relationships, and economicrelationships(Boons&Lüdeke-Freund,2013;Matos&Silvestre,2013).Theserelationshipsmayhelpanorganizationtoexploitnewgreenopportunities(Nair&Paulose,2014).

Researchhasshownthatthedevelopmentofagreenbusinessmodel iscontingentonvariousfactors,suchastheeconomicenvironment,typeofcompanyandinternalandexternalstakeholderrelationships(Boons,Montalvo,Quist,&Wagner,2013;Bohnsack,Pinkse,&Kolk,2014;Abuzeinab&Arif,2014).Inadditiontoallthesefactors,someorganizationsactinamarketthatiscontrolledordictatedbyrulesandregulations.Fortheorganizationsinthesemarketstheonlyoptionistodealwiththeenvironmentalrulesand regulationsandadapt their strategy to it.Although rulesand regulationsdonotnecessarilypushorganizations towardsa specific technology, it can create landscape conditions that arenecessary forsuccessfulsustainableinnovation(Mazur,Contestabile,Offer,&Brandon,2015).

There is no unanimous conclusion how rules and regulations influence an organization’s innovationcapacity and the business model. Some literature argues that environmental rules and regulationsinfluenceanorganization’sinnovationcapacitypositively(Debnath,2015;Porter&vanderLinde,1995),otherssuggeststhatthereisnoinfluenceatall(Jaffeetal.,1995),whilethethirdstreamstatesthatrules


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and regulations are negatively related to the innovation capacity (Palmer, Oates, & Portney, 1995).Becauseofthesethreeviews,itisthereforeunclearhowenvironmentalrulesandregulationsinfluencethe organization and how organizations should organize their business model to commercialize asustainableinnovationgiventheserulesandregulations.

2.1.1 GraphicaloverviewframeworkAsastartingpointforinvestigatingtheintegrationofenvironmentalrulesandregulationsintothegreenbusinessmodel,aframeworkhasbeendeveloped.Atotaloverviewoftheliteratureframeworkisgiveninfigure1,itshowstherelationshipbetween(sustainable)innovationsandthebusinessmodel,businessmodelinnovationfromaregularbusinessmodeltoagreenbusinessmodel,andtheexternalfactorsthatinfluencethegreenbusinessmodel.Asmentionedabove,existingliteraturehasproducedmixedresultsastowhetherrulesandregulationsfacilitateorhinderthecommercializationofsustainableinnovations.To further investigate how organizations should organize their business model to commercialize asustainableinnovationgiventheserulesandregulations,theliteraturereviewisstructuredasfollows.Inparagraph2.2theimportanceofsustainabilityandsustainableinnovationsarediscussed,whileparagraph2.3exploresbusinessmodelsinrelationtosustainableinnovations.Akeyfactorforgreenbusinessmodelsis the role of the government by introducing rules and regulations, so paragraph 2.4 points outenvironmentalrulesandregulationsandtheirinfluenceontheorganization’sinnovationcapacityanditsbusiness model. The literature review ends with paragraph 2.5, which is the conclusion on therelationshipsthathavebeenfoundintheliterature.

Figure1:Graphicaloverviewframework


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2.2 SustainableinnovationGlobal warming is a serious threat to the community, therefore topics as environmental economics,sustainabledevelopment,andcorporatesocialresponsibilityaregettingmoreandmoreattention(Souto& Rodriguez, 2015; Bocken & Short, 2015). As stated in Europe 2020 three goals with respect tosustainabilityareformulated:(1)ReductionofCO2emissionsby20%,(2)theraiseofusingsustainableresourcesby20%,and(3)araiseof20%inenergyefficiency(EuropeanCommission,2010).Asaresultofglobal warming and the objectives of Europe 2020 and the G8, there is an increased interest byorganizations in sustainable innovations and sustainable energy. Hellström (2007) defines sustainableinnovationas“theprocessofdevelopingnewideas,behavior,productsandprocessesthatcontributetoa reduction in environmental burdens or to ecologically specified sustainability targets” (p. 148). Forexample,thethreemajortechnologicalchangesinsustainableenergydevelopmentareenergysavingsonthedemandside,efficiency improvements in theenergyproduction,andthereplacementof fossilfuelsbyvarioussourcesofrenewableenergy(Lund,2007).

However,inpracticesustainableinnovationandsustainabledevelopmentismorecomplicatedthananinnovation without a sustainable base. Dearing (2000) argues that leading companies in sustainableinnovation have built their approach based on three principles. First, the organization’s attitude isimportant.Itiscrucialfortheorganizationtounderstandwhatsocietyexpects,andinreturnexpressingwhattheorganizationstandsfor.Second,theorganizationshouldbuildthecapacitytoact.Itisnecessarytodeveloptoolsandmethodstoimproveperformanceinthesocial,environmental,andfinancialfieldsof sustainable innovation, and incorporate this into the already existing business processes. The lastprincipleistochecktheprogress,bysettingrealistictargetsandmeasuretheseduringthewholeprocess(Dearing,2000).

Overallcanbeconcludedthatduetoanincreasedinterest inenvironmentaleconomicsandcorporatesocialresponsibilitythedevelopmentofsustainableinnovationshasbecomemoreandmoreimportant.However, sustainable innovation ismore complicated than innovationwithout a sustainable base, sotherefore organizations should definitely adapt to organizations to it. The adoption of sustainableinnovationsbyusersisalsomorecomplexthanforinnovationswithoutasustainablebase.Thestructureofthisparagraphisasfollows.Insubparagraph2.2.1thecategorizationofsustainableinnovationswillbediscussed,while insubparagraph2.2.2thedifferenttypesofadopterswillbedistinguished.Additionalliteratureon innovation canbe found inAppendixA.AppendixA1 contains the relationship betweencreativity, invention, and innovation. Appendix A2 discusses the different forms of innovation, whileAppendixA3distinguishesthedifferenttypesofinnovationsforthoseformsofinnovation.AppendixA4containspredictorsforinnovation,andAppendixA5discussesthebarriersforinnovation.

2.2.1 CategorizationofsustainableinnovationsHellström (2007) analyzed 105 concept ideas related to sustainability, sampled from a nationalenvironmentalinnovationcompetition.HecategorizedtheseusingtheSchumpeterianinnovationview,which categorizes innovationsas follows:Newproducts, newmethodsofproduction,new sourcesofsupply, organizing newmarkets, newways of organizing the business, newproduct& new source of


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supply, or new production& new source of supply. Hellström (2007) assumed thatmost sustainableinnovationsaimtoimprovetheproductionmethod,andbasedontheinnovationsample,thisassumptionseemstoberight.Thecategorynewmethodsofproductionis54,3%ofthesample.Thesecondlargestcategoryisthecategorynewproducts,whichisequalto30,5%.Thethirdcategory,representing9,5%ofthetotalsample,isnewproduction&newsourceofsupply.Thenumberofsustainableinnovationsinthiscategoryisseriouslylessthanthenumberofsustainableinnovationsinthefirsttwocategories.Thelastthreeinnovationsaredividedinthecategoriesnewsourceofsupplyandnewproduct&newsourceofsupply,withtwoandoneinnovationsrespectively.Overall,sustainabledevelopmentismostlyrelatedto new sustainable products or to new sustainable methods of production (equal to 84,8% of theinnovationsample).Theresultsareshownintable1.

Table1:DistributionofsustainableinnovationsbySchumpeterianview(Hellström,2007)

2.2.2 AdoptionofsustainableinnovationsBasedonthedegreetowhichaconsumerisrelativelyearlyinadoptingnewideasincomparisontootherconsumers,Rogers (2003)categorizedadoptersof innovations intofivedifferentcategories,knownasinnovators,earlyadopters,earlymajority,latemajority,andlaggards.Innovatorsarethefirstgroupthatwilladoptaninnovation,andareusuallycharacterizedasconsumerswhoarewillingtotakerisks.Theyarewellinformedaboutproductdevelopmentandtheyrepresentabout2,5%ofthegroupadoptingtheinnovation.Thesecondcategoryisnamedasearlyadopters,agroupthatenvisionstheadvantagesofaninnovationandadoptsmainlytogainrespectfromothers.Thegroupsizeisaround13,5%oftheadoptinggroup.Thethird,earlymajority,andfourthcategory,latemajority,arethetwolargestadoptinggroups,bothareequaltop34%.Theearlymajorityhastobeseriouslyconvincedbeforetheyarewillingtoadopttheinnovation,whilethelatemajorityisskepticalandcautious.Theyonlyadoptaninnovationwhenitisonthemarketforalongertimeandshowsobviousadvantages.Thelastcategoryisnamedaslaggards,alsoknownastraditionalists,andtheydislikechange.Theywillonlyadoptifalternativesarenolongeravailable.Theirsizeisabout16%oftheadopters(Noppersetal.,2015).Figure2showsallcategorieswithcorrespondingpercentages.

Figure2:Adoptercategories(Rogers,2003)


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Fortheadoptionofsustainableinnovation,threetypesofattributesareimportant(Noppersetal.,2015).Theseareknownas instrumental,environmental,andsymbolicattributes. Instrumentalattributesarerelated to the perceived functional outcomes of using a sustainable innovation, for example limiteddriving range of an electric vehicle. Environmental attributes reflect the perceived outcomes for theenvironmentofusingasustainable innovation, forexampleemissionreductionwhenusinganelectricvehicle.Symbolicattributesarerelatedtotheperceivedoutcomesofusingasustainabletechnologyforconsumer’sidentityandsocialstatus,forexampledrivinganelectriccarlikeTesla.Apositiveevaluationofthethreeattributesincreasesthepossibilityofadoptingthesustainableinnovation,althoughsymbolicattributesare less recognizedby consumersasmotivation for innovationadoption. Researchhasalsoshown an interaction between instrumental and symbolic attributes which affects the adoption ofsustainable innovations. When the instrumental attributes are negatively evaluated by instrumentaldrawbacks,forexamplehighercosts,symbolicattributeswillbemorepositivelyevaluated.Usingacostlyinnovation reflects the intense desire of the consumer, since the consumer really wants to use theinnovationevenifitresultsinhighercosts(Noppers,Keizer,Bockarjova,&Steg,2015).

Noppersetal.(2015)investigatedthedifferencesinadoptionmotivationsbetweenearlieradoptersandlater adopters, for electric cars in specific. A questionnaire was conducted among 2794 Dutchrespondents, randomly drawn and stratified according to gender, age, income and education. In thisquestionnairetherespondentswereaskedtoscalestatements,relatedtoinstrumental,environmental,andsymbolicattributes.Noppersetal.(2015)concludedthattherewerenosignificantdifferencesintheevaluation of environmental attributes and hardly any differences in the evaluation of instrumentalattributesbetweenearlyand lateradopters.Althoughtherewerenodifferences for instrumentalandenvironmental attributes, early adoptersweremore interested in electric cars because they seem tobelievethatitgivesthemstatusandshowwhotheyare.Thisisrelatedtothepositiveevaluationofthesymbolicattributes.

Another researchwith respect to sustainable innovationadoptionwasconductedbyOzaki (2011).Heanalyzedtheadoptionofgreenelectricityandwhatencouragesadopters toadopt.Thesamplegroupconsisted of people with a green attitude towards sustainable innovations, however Ozaki (2011)concludedthatthereisacleardistinctionbetweenadoptionintentionandactualadoptionbehavior.Thechallenge for those who are offering the innovation, is to close the gap between intention and realadoption.Torealizeashiftfromadoptionintentionstoactualadoption,thesustainableinnovationhastoofferpersonalbenefitstotheadopter,theinnovationshouldbecompatiblewiththeadopter’svaluesandidentity, theadopter is influencedbysocialnorms, theadopterexperiencesasortofcontrolover thecosts,thereshouldbelessriskanduncertainty,andgoodinformationisprovidedtotheadopter(Ozaki,2011).

Itmightbethattheexistenceofenvironmentalrulesandregulationscanalsobeakeyfactorthatclosesthegapbetweenadoptionintentionandrealadoption.Rulesandregulationscanpushanorganizationtowardsasituationthattheorganizationisnolongerinthepositiontochoose,becausetheorganizationisforcedtouseacertainsustainableproductorsustainableproductionmethod.Theadoptionmotivation


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thenlieswithintheexistenceofrulesandregulations.Thedegreetowhichaconsumerisrelativelyearlyinadoptingisthenalsoinfluencedbytheexistenceofrulesandregulations.Somegovernmentsfinancesustainable (pilot) projects, which might be the trigger for the organization to switch to sustainableproducts or sustainable production methods relatively early. Other organizations switch later tosustainability, and stretching the change period as long as possible. Fixed datesmight be formulatedwithinrulesandregulations,andtheseformtheendoftheadoptionperiod.

2.3 BusinessmodelsandsustainableinnovationTo explore the relationship between sustainability, business models, and environmental rules andregulations, this paragraph addresses business models. The structure of chapter three is as follows.Subparagraph2.3.1discussestheregularbusinessmodelanditsmaincomponents.Subparagraph2.3.2isanextensionoftheregularbusinessmodel,thegreenbusinessmodelforsustainableinnovations.Itwilldiscusstheroleofthegreenbusinessmodelandthechallengesandinfluencesthathavetobetakenintoaccountwhenusingthegreenbusinessmodel.

2.3.1 BusinessmodelAccordingtoOsterwalderandPigneur(2010)thebusinessmodeldescribeshowanorganizationcreates,delivers,andcapturesvalue.AnextendeddefinitionofthebusinessmodelisgivenbyMoris,SchindehutteandAllen(2005),whostatedthat“Abusinessmodelisaconciserepresentationofhowaninterrelatedsetofdecisionvariablesintheareasofventurestrategy,architecture,andeconomicsareaddressedtocreatesustainablecompetitiveadvantage indefinedmarkets” (p.727).Thebusinessmodelconsistsoffourmaincomponents,knownasthevalueproposition,thecustomerinterface,thesupplychain,andthefinancialmodel(Morris,Schindehutte,&Allen,2005;Boons&Lüdeke-Freund,2013).Althoughthenameofthemaincomponentsmayvaryanddependsonthechoiceoftheauthor,thelayoutalwaysremainsthesame.Figure3displaysthebusinessmodelcanvas.

Figure3:Businessmodelcanvas(Osterwalder&Pigneur,2010)


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ValuepropositionThevaluepropositionexpressesthevaluecreatedforacustomersegmentbymeetingneedsofthosespecificcustomers.Valuetothecustomercanbequalitative,forexampletechnicalfeatures,function,orcustomer experience, and/or quantitative, for example price or delivery time. Value creation can beachievedinseveralways,forexamplenewnessofaproductorservice,meaningthatanewsetofdemandswhichwasnotrecognizedbythecustomerbeforehavebeenmet.Otherwaystocreatevalueareproductimprovementsorproductcustomization.Somecustomersappreciateaspecificdesignorbrandname,and therefore these are also recognized as a method of value creation. An attractive price or costreduction for the customerwhile using theproduct ismentioned asmethods aswell (Osterwalder&Pigneur,2010).

CustomerinterfaceAmarketsegmentisagroupofcustomersinthemarketwithsimilarneedsandmayincludegeographicallocation,purchasingpower,andbuyingattitudes.Theprocessofdividingthemarketintothesesegmentsiscalledmarketsegmentation (Byers,Dorf,&Nelson,2011).Anorganizationmayprefer toserveonemarketsegment,howevertheyalsocanchoosetooffertheirproductstomultiplesegments.Evenservingthe mass market could be an option (Osterwalder & Pigneur, 2010). Next to the market segment,customer relationships are an element of the customer interface as well. It is important for theorganizationtodeterminewhichrelationshiptheywouldmaintainwiththespecificmarketsegment(s).This can vary from personal to fully automatic, but the motivation behind it is essential. Customeracquisition, customer retention, and boosting sales (upselling) are examples of such a motivation(Osterwalder&Pigneur,2010).Thelastelementofthecustomerinterfaceisthemethodofdeliveringvaluetothecustomer,knownaschannels.Anorganizationcanchoosetousetheirownchannels,ortousethechannelsofapartner(Osterwalder&Pigneur,2010).

SupplychainThesupplychainconsistsoftheorganization’skeyactivities,keyresources,andkeypartners.Thekeyactivitiesarethemostimportantactivitiestheorganizationshouldexecutetomakethebusinessmodelwork.Toexecutethekeyactivities,theorganizationshouldpossessenoughassets,calledkeyresources.These resources can be categorized as physical, intellectual, human, and financial. In practice, theorganizationwill combine key resources tohave a successfulmarket entrance.Which resourcesusedmainlydependsonthetypeofbusinessmodelused.Thelastelementofthesupplychain,keypartners,is the network of suppliers and partners involved in the business model. Motivations to establishpartnershipscanbe found inbenefits fromeconomiesofscale, reductionofuncertaintyandrisk,andacquisitionofparticularresourcesandactivities(Osterwalder&Pigneur,2010).

FinancialmodelThefinancialmodelconsistsofrevenuestreamsandcosts.Revenuestreamscanbegeneratedthroughasset sale, ownership rights of physical products are sold to the customer. Other revenues can begeneratedaswell,forexampleusagefees,subscriptionfees,lending,renting,leasing,orlicensing.Totalcostsdependontheapproachusedwithinthebusinessmodel,knownasacost-drivenmodeloravalue-


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drivenmodel.Forthecost-drivenmodelanorganizationstrivestominimizecostswhenmeetingcustomerneeds,whilethevalue-drivenmodelhasaclearfocusondeliveringmaximumvaluetothecustomerwith‘less’interestsforthecosts.Costsinthefinancialmodelcanbedividedintofixedcostsandvariablecosts.Reducingthevariablecostscanbeachievedbyeconomiesofscaleandeconomiesofscope.Thismeansthatvariablecostsperproductreduceasthevolumeincreasesandthevariablecostsperproductreduceduetoalargerscopeofoperationsrespectively(Osterwalder&Pigneur,2010).

2.3.2 GreenbusinessmodelSeveralarticlesarguethatwhentheinnovationisrelatedtosustainability,aregularbusinessmodeldoesnotsuitanymore(Bohnsack,Pinkse,&Kolk,2014;Matos&Silvestre,2013;Nair&Paulose,2014).Thedrivers behind sustainable innovation are usually known, however less knowledge is available howsustainableinnovationscanberealized(Boons,Montalvo,Quist,&Wagner,2013).Theregularbusinessmodelshouldbereplacedbyagreenbusinessmodel,whichconsistsofthesameelementsastheregularbusinessmodel,buthasaclearfocusonthreetypesofrelationshipsbetweentheorganizationanditsstakeholders: social relationships, environmental relationships, and economic relationships (Boons &Lüdeke-Freund,2013;Matos&Silvestre,2013).Itmeansthatbesidesthefinancialviewanorganizationalways has, an organization should also focus on societal acceptation of sustainable innovations. Thedevelopmentofsustainable innovations isthecreationofeconomicbenefitsaswellassocietalprofits(Boons& Lüdeke-Freund, 2013). These relationships are not specific for one element of the businessmodel,butareintegratedthroughthewholemodel.

RoleofthegreenbusinessmodelAsalready statedabove, thegreenbusinessmodel contains the sameelementsasa regularbusinessmodel.Thevaluepropositiondisplaysthebalanceintheneedswithintheeconomic,environmental,andsocial fields (Boons & Lüdeke-Freund, 2013; Matos & Silvestre, 2013). For existing products theorganizationhastoseekforabalanceinarelativelytechnologicalapproach,whilefornewproductsthisbalanceismorefocusedontheniches.Thesupplychaininthegreenbusinessmodelcontainssupplierswhotaketheirresponsibilityfortheiractionsandengageinsustainablesupplychainmanagement.Notonly suppliers should take their responsibility,butalsocustomers shouldbemotivated to take theirs.Customer relationships should focus on the awareness of sustainability and the challenges with thistransition.Thefinancialmodelismoreorlessthesameasinaregularbusinessmodel,howeverinsomecasesthefocusoftheorganizationislessrelatedtoprofitsbutmorerelatedtosustainabilityitself(Boons&Lüdeke-Freund,2013).

Asolidbusinessmodelisanimportantfactorformarketsuccess,howeverwhentheinnovationisrelatedto sustainability itmight be evenmore important because of the additional societal acceptance andenvironmental contribution. Sustainable innovations canbedivided into technological, organizational,andsocialinnovation.Foreachtypeofsustainableinnovationthebusinessmodelhasitsownrole.Whenthe sustainable innovation is technological, the fitbetween thebusinessmodel and the technologicalchangeiscrucial.Anewbusinessmodelcanbecreatedforanexistingtechnology,anexistingbusinessmodelcantakeupnewtechnologies,oranewbusinessmodelisdevelopedforanewtechnology(orvice


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versa).BoonsandLüdeke-Freund(2013)concludethatthebusinessmodelforatechnologicalsustainableinnovationisasfollows:“Sustainablebusinessmodelswithafocusontechnologicalinnovationaremarketdevicesthatovercomeinternalandexternalbarriersofmarketingcleantechnologies;ofsignificanceisthe business model’s ability to create a fit between technology characteristics and (new)commercializationapproachesthatbothcansucceedongivenandnewmarkets”(p.16).

Next to the technological sustainable innovation, the innovation canalsobe related toorganizationalchange. Stubbs and Cocklin (2008) stated that sustainability from the non-economic field is directlytransferredtotheorganizationallevel.Whentheinnovationisorganizational,differentfactorshavetobetakenintoaccount.Theyareknownasstructuralandculturalattributes,organizationalcapabilities,andthe socioeconomic environment. Their relationship is shown in figure 4. Based on the availableinformation on organizational change and sustainability, Boons and Lüdeke-Freund (2013) state that:“Businessmodelchangeontheorganizationallevelisabouttheimplementationofalternativeparadigmsother than the neoclassical economic worldview that shape the culture, structure, and routines oforganizationsandthuschangethewayofdoingbusinesstowardssustainabledevelopment:asustainablebusinessmodelistheaggregateofthesediverseorganizationalaspects”(p.18)

Figure4:Factorsoforganizationalchange(Boons&Lüdeke-Freund,2013)

Thelasttypeofsustainableinnovationissocialinnovationandisrecognizedasthekeytorealizeashiftwithin the market to sustainability. The main focus is to create sustainable awareness, althoughprofitability is not excluded from the business model. It usually is a combination of the two, sinceprofitability is also necessary to remain operative in the sustainability field (Wells, 2013). Boons andLüdeke-Freund (2013) have described the combination of social innovation and business models as:“Sustainable businessmodels enable social entrepreneurs to create social value andmaximize socialprofit;ofsignificance is thebusinessmodels’abilitytoactasmarketdevicethathelps increatingandfurtherdevelopingmarketsforinnovationswithasocialpurpose”(p.20).

ChallengesandinfluencesAs stated before, sustainable innovation and green business model development is related toenvironmental,economic,andsocialrelationshipsandactivities(Boons&Lüdeke-Freund,2013;Matos&Silvestre,2013).Eachactivitywilldiffer incontextasaresultofspatial,temporal,andculturalfactors.


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ThereforeBoonsetal.(2013)mentionthesustainablechallengesincombinationwiththedifferenttypesofeconomy,knownasconsumeristeconomies,emergingeconomies,andBOPeconomies(Base-Of-the-Pyramid). For example, organizations that operate in BOP economies face higher complexity andambiguity,asaresultoflowerincomeofindividuals.Additionalchallengesmightdevelopbecausesomestakeholdersinthevaluemayholdlesspowerthanothermembers(Matos&Silvestre,2013).

Bohnsacketal.(2014)mentionedanotherelementforthedevelopmentofsustainableinnovationsandthecorrespondingbusinessmodels.Theydidresearchinthefieldofelectricvehiclesandtheyfoundthatthe market position of an organization is important as well. There is a clear distinction betweenincumbentsandnewentrantsandtheircapabilitiestoinnovatesustainable.Bothwillfacechallengestodevelopgreenbusinessmodels,howevertherearecrucialdifferencesbetweenthetwo.Incumbentsandnewentrantsmayhavenotthesameaccesstodifferentsourcesofvaluecreation,whichisconstrainedby the path-dependent behavior (Chesbrough, 2010). Path-dependent behavior is behavior that isconstrainedbypastsuccessesandthereforeorganizationsstayconsciouslyorunconsciouslytooldhabits.Their findings suggest that incumbents are more cognitively constrained than new entrants by pathdependencies, resulting in staying close to theexistingbusiness logic. Theuseof anexistingbusinessmodelisstrengthenedbyincumbents’complementaryassetstoo,althoughitgivesthemtheopportunityto respond faster to contingent events than entrepreneurial firms can. They conclude that thecombinationofdominantbusinessmodellogic,complementaryassets,andcontingenteventsisaself-reinforcingmechanism,drivingpath-dependentbehavior.Newentrantshoweverdonotattempttofitnewtechnologiesintooldbusinessmodelsandareabletodevelopnew(green)businessmodels.Theirproblemisusuallythelackofresources(Bohnsack,Pinkse,&Kolk,2014)

A third challenge that may rise with the introduction of a new sustainable innovation is that user’spreferencesarenotcleartoanorganization.Thetransitiontosustainabilityinvolvesotherpreferencesofconsumers and barely knowing these results in difficulties with meeting customers’ demands. Theintroductionofnewtechnologiesmayalsoinvolvenewriskstocustomerswhoarethereforelesswillingtouseit.Fororganizationswhoareintroducingthesustainableinnovation,therelationshipbetweenthevaluepropositionandtheconsumerdemandhasbeenidentifiedaschallenging(Kemp,Schot,&Hoogma,1998).Thelastchallengethatmayrisewiththeintroductionofanewsustainableinnovationisthatthesustainable innovation has less technological functionality than expected by the users and is moreexpensiveduetolow-scaleproduction.Optimizationisrequiredbyconsumersonalargescale,resultingintestingandredesigning.Italsomaybethatcomplementarytechnologiesareneeded,butthattheyareperhapsnotavailable(Kemp,Schot,&Hoogma,1998).

The fourth factor, the key factor that can influence green business models, is the existence ofenvironmentalrulesandregulationsformulatedbyalocalorthenationalgovernment.Itisanexternalfactor which cannot be influenced by the organization, so they have to adapt their strategy to it.Boundarieshavebeenshapedbyanexternalactor,andthechallengeforanorganizationistoperformoptimallywithinthoseboundaries.Awell-knownexampleistheautomotiveindustry,wheretheelectricvehiclemarketisparticularlyshapedandcontrolledbyrulesandregulations,introducedbylocal,national,


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andinternationalgovernments.Theserulesandregulationsaremainlyfocusedonthereductionofcarbonemissionsandtheimprovementoftheairquality(Ceschin&Vezzoli,2010).Theintroductionofanewtechnology and the interference of governments require also a (parallel) innovation in the businessorganization,especiallywhentheinterferenceisrelatedtogovernmentalsupport.Thefirstreasonistomakesurethatpublicfundsarenotwastedonanewtechnologythatnevergainmarketacceptance.Asecondreasonfororganizationalinnovationisthatthecostsareminimalincomparisonwithtechnologyinnovationandthereforeattractive(Wells,2013).

2.4 EnvironmentalrulesandregulationsAlthoughseveralexternalfactorsarementionedasinfluencestothegreenbusinessmodel,thekeyfactoris rules and regulations. Therefore, to investigate the relationship between sustainability, businessmodels, and environmental rules and regulations, this chapter addresses environmental rules andregulations.Thestructureofthisparagraphisasfollows.Subparagraph2.4.1discussestheintroductionofenvironmentalrulesandregulations,whilesubparagraph2.4.2discussesinnovationasaresultofrulesandregulations.Thethirdsubparagraphdistinguisheshowanorganizationanditsinnovationcapacitycanbeinfluencedbyrulesandregulations,whilethelastsubparagraphreviewtheneedforenvironmentalrulesandregulations.

2.4.1 IntroductionofenvironmentalrulesandregulationsTherearemanyinitiativeswithrespecttoenvironmentalrulesandregulations.Forexample,extendedproducerresponsibility(EPR)focusesonproductsystems,withtheaimtoencourageproducerstopreventpollutionandtakeresponsibilityfortheproductaftertheendofitsusefullife.Anotherpolicyinstrumentisenvironmentallyresponsiblepublicprocurement(ERPP),which isan instrumenttopromotegreenerproducts.Athirdpolicyistheintegratedproductpolicy,alsoknownasIPP.Itincorporatealltoolsthatareproduct related and it takes an integrated, lifecycle approach towards improving the environmentalperformanceofproductsystems(Li&Geiser,2005).Eachofthementionedpoliciesisshownintable2forvariouscountries. ISOType1refersto ‘seal-of-approval labels fromindependentthirdpartiesthataward them to the best environmental performers in various product categories based on a set ofperformancecriteria’(p.706).

Table2:Environmentalproductpolicyinstrumentsinvariouscountries(Li&Geiser,2005)


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2.4.2 InnovationasaresultofenvironmentalrulesandregulationsInnovationistypicallytheresultoftechnologypushandmarketpullfactors.Technologypushmeansthatthedevelopmentofanewtechnologywillbetheinputforaninnovation,andmarketpullmeansthattheinnovation is created as a result to input of customer needs (Luyten, 2003). The introduction ofenvironmental rules and regulations by governments is considered a push factor, since it forcesorganizations to meet the set standard. However, rules and regulations are also capable of directlyaffectingthemarketstructureand-mechanismbecauseinnovativeorganizationsarecapabletocreateashifttofromaregulatorypushtoamarketpullsituation(seefigure6).Thereforeenvironmentalrulesandregulationsmayincreasedemand,itmaycreatenewdemandanditmayincreasethecompetitivenessforseveralorganizationsoperatinginthemarket(Debnath,2015).

Figure5:Technologypushvs.marketpull(Debnath,2015)

Porter and van der Linde (1995) distinguish two different categories for sustainable innovations inresponsetoenvironmentalrulesandregulations.Thefirstcategorydescribesthe innovationasanewtechnologyorapproachthatminimizescostsofdealingwithpollution.Costminimizationistheconversionofpollutionfactorsintosomethingofvalue,forexamplerecyclingofwastematerials.Thesecondcategoryfocusesontheimprovementofresourceproductivity.Theseinnovationsoffersolutionstothecauseofpollutionbysubstitutingpollutingfactorsorutilizeresourcesbetterthantheyhavebeenbefore(Porter&vanderLinde,1995).

2.4.3 Effectsofrulesandregulationsontheorganization’sinnovationcapacityLiteraturesuggeststhattherelationshipbetweenrulesandregulationsandtheorganization’sinnovationcapacityandcompetitivenesscanbeinfluencedinthreeways:positive,negative,ornoeffectatall.Inthefollowingparagraphseachofthesetypesofinfluencewillbediscussed.


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PositiveinfluenceSome literature argues that rules and regulations have a positive effect on the organization and itsinnovation capacity. Debnath (2015) investigated the relationship between environmental rules andregulationsand innovationson theelectricalvehiclemarket.Thebase forhis researchwas theSWOTanalysis,whichisaninternalandexternalanalysistodeterminestrengths,weaknesses,opportunitiesandthreatsofanorganization(Byers,Dorf,&Nelson,2011).Debnath(2015)categorizedenvironmentalrulesandregulations,usually introducedbya localornationalgovernment,asathreattotheorganization.Althoughenvironmentalrulesandregulationsmayincreaseinvestmentcosts,itwillforcetheorganizationtobehaveinnovative.Finally,thiswillresultinimprovedproductsorproductionprocessestoneutralizethesecosts.ThisrelationshipusedinDebnath’s(2015)researchisshownintable3.

Table3:RegulationinaSWOTanalysis(Debnath,2015)

As mentioned before, Debnath investigated the relationship between environmental rules andregulations and the electric vehicle market. As a result of new regulations in Japan to decrease theemissionofCO2,ToyotaandNissanbothintroducedanewvehicletothemarket,thePriusandtheLeafrespectively. The Toyota Prius reduced its emission by 75 percent from the level of 2005 emissionstandard,whiletheNissanLeafevenexceededthisandbecamethefirsthundredpercentelectriccar.BothcarmanufacturersusedR&Dasa response to the rulesand regulationsandcreated innovation,whichnotonlyledtoanewcarbutalsocreatedanewwholemarketforthem.NissanaswellasToyotaclearedthestandardoftherulesandregulationsbytheireffortsinR&DandtheintroductionoftheNissanLeafandToyotaPrius.

ThesalesofthenewcarsallowedthemanufacturerstoincreasetheirsalesandincreasetheinvestmentinR&D.Thetechnologycapabilityandhumanresourcesimprovedaswell,andmadeitpossibletoimprovethe older electric vehicles and to develop newer ones. Is seems to work as an expanding spiral andencouragethecompanytoinnovatecontinuously.ContinuousinnovationhelpedNissanandToyotatoexpandtheproductlifecycleandtorespondquicklytoenvironmentalrulesandregulations(Debnath,2015).Theconceptofexpandingspiralsandcontinuous innovation isdisplayed intable4,which isanextensionoftable3.


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Table4:Continuousinnovationthroughrulesandregulations(Debnath,2015)

Next to Debnath (2015), also Porter and van der Linde (1995) stated that environmental rules andregulationscanhaveapositiveinfluenceonanorganization’sinnovationcapacity,becausetheybelievethatpollutionisaformofeconomicwaste.TostrengthenthisclaimtheyusedtheDutchflowerindustryas an example. Previously, the cultivation of flowers led to serious environmental problems such ascontaminationofsoilandgroundwaterwithpesticides.Theintroductionofnewrulesandregulationstopreventthecontamination,ledtoasituationwheretheorganizationshadtoinnovatetoovercometheproblem.Theydevelopedaclosed-loopsystem,withthere-useofwaterandlessneedforpesticides.Asaresultoftheseclosed-loopsystems,thesoilandgroundwaterwerenolongercontaminatedandthequalityoftheflowersevenimproved,becausethevariationingrowingconditionswasalsoreduced.Thecosts of cultivation flowers decreased as well. Using this example, Porter and van der Linde (1995)concludedthattheaimofpolicymakers,businessleaders,andenvironmentalistshavebeenwrong,sincetheywerefocusedtoomuchonthestaticcostimpactsandignoredtheproductivitybenefitsthatraisedfromtheenvironmentalinnovation.

NoeffectsJaffe et al. (1995) argue that there is relatively little evidence to state that environmental rules andregulations influence theorganizationand its competitiveness.Although the introductionof rulesandregulationsmay involve social costs, elements as net exports, overall trade flows, and plant-locationdecisionsarenotsignificantlyinfluenced.Thereareanumberofreasonstobelievewhytherelationshipbetween rules and regulations and the organization’s competitiveness is small (nor significant) anddifficulttodetect.

First,thedatausedtoexaminetherelationshipislimitedintheirabilitytodetectasignificantinfluenceofrulesandregulationsoneconomicperformance.Second,inlargeindustriescompliancecostsarejustasmallportionofthecostsofproduction,whichmeansthatothercostsaslaborcostsorrawmaterialcosts are relativelyhigher and thereforeoverwhelm theenvironmental effect. Third, theexistenceofdifferences inrulesandregulationsbetweencountriesmakes itharderto investigatetherelationship.Fourth,multinationalsalwaysaimtobuildstate-of-the-artplantsinforeigncountriesresultinginthefact


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thatdifferences in rules and regulationsnot alwaysmaybeexploited. The last reason is that even indeveloping countries plants are built by local or national organizations with relatively high pollutioncontrol,sometimesmorethanisrequired(Jaffe,Peterson,Portney,&Stavins,1995).

NegativeinfluencePalmer, Oates, and Portney (1995) states that environmental rules and regulations can negativelyinfluenceanorganization,howevertheyacknowledgethattheirviewhasseveralsimilaritieswiththeviewofPorterandvanderLinde(1995).First,theyagreethatincentive-basedregulationshouldbepreferredabovecommand-and-control.Second,earlyestimatesofcompliancecostsseemedtobebiased(toohigh)becauseoftechnologicalchangesthatnothavebeenforeseen.Third,theavailabilityonenvironmentalinformation may help to develop and disseminate new technologies. And the last similarity,environmentalrulesandregulationsmayleadtothecost-savingorquality-improving.

Palmer,Oates,andPortney(1995)arguethatenvironmentalrulesandregulationscouldhaveanegativeinfluence on the organization. To show and explain their statement, they used an example of anorganization operating on a market which is controlled by incentive-based environmental rules andregulations.Theyassumedthatthisorganizationmaximizesprofitswithinaperfectlycompetitivemarket,thattheorganizationtakesnoteofcompetitors’outputsandR&Dexpenditures,andthattheorganizationdoes operate under the introduced environmental rules and regulations. Figure 7 shows theorganization’soptionswiththeabatementlevelonthehorizontalaxis,meaningthereductioninpollutionmovingfromlefttoright.Theverticalaxisdisplaysthecostsofpollutionreductionmeasuredindollars.

Figure6:Innovationincentivesunderrulesandregulations(Palmer,Oates,&Portney,1995)

TheMACcurveistheMarginalAbatementCostfunction,whichisthemarginalcostfortheorganizationtoreduceitspollutionbyanadditionalunit.Thepositiveslopeofthecurvemeansthatthemarginalcostincreasestoreducepollution.UsingR&Dexpenditures,assumedthatthere isnoriskoruncertainty intheseexpenditures,itmightbepossiblefortheorganizationtorealizeashiftfromMACtoMAC*.MAC*isthenthenewMarginalAbatementCostfunction,meaningthecostfortheorganizationtoreduceits


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pollutionbyanadditionalunitaftertheyinvestedinR&D.TheorganizationwillonlydecidetoinvestifthebenefitsthathavebeenachievedaregreaterthanthetotalinvestmentcostsinR&D.

If the introduction of environmental rules and regulations forces the organizations to decrease itspollution,totalcostswillrise(shownasamovementfromPtoP’infigure7).EvenwhentheorganizationdecidedearliertoinvestinR&D,totalcostswillincreaseasaresultofthenewenvironmentalrulesandregulations.Althoughtheabatementlevelishigherthanbeforeanditispositiveforsociety,totalcostshave been increased. Palmer, Oates and Portney (1995) argue therefore that an organization and itsinnovationcapacityarenegativelyinfluenced.

2.4.4 Effectsofrulesandregulationsontheorganization’sbusinessmodelIt might be difficult for radical sustainable technologies to be competitive, because they are toodemanding in the socio-technical field. To shield these innovations against mainstream selectionpressures, such as mainstream rules and regulations, end-user practices and existing infrastructure,protectivespaceswithinthemarketcanbecreated.Withintheseprotectivespaces,alsoknownasniches,theradical technologycandevelopandscale-up (Schot&Geels,2008;Smith&Raven,2012;Huijben,Verbong,&Podoynitsyna,2016).NichescanbedevelopedbyshieldingprocesseswhicharedescribedbySmithandRavenas ‘processesthatholdatbaycertainselectionpressuresfrommainstreamselectionenvironments’(p.1027).Huijben,Verbong,andPodoynitsyna(2016)studiedbusinessmodelsandtheirinteractionwiththeregulatoryregime.Theirresultsshowedthatthelevelofnicheshieldingispositivelyinfluencing the financial component of the business model, leading to interesting opportunities fororganizations operating in the market. A high level of niche shielding is also positive for theimplementationofthirdpartybusinessmodels,sinceit ismoreattractiveforexternal investors.Nicheshielding,basicallya formof financial support, isusually followedbycertainnicheshielding rulesandregulations,todeterminewhatcomesatthecostsfortheorganizationaswell.Organizationsalsohavetointegrate mainstream regulations into their business models, which may lead to additional costs.Economiesofscalemaybeasolutiontoencountersuchcosts(Huijben,Verbong,&Podoynitsyna,2016).

Their findings also showed that organizations choose differently to deal with particular rules andregulations. For example, some organizations choose to adapt a fit-and-form strategy. An extendedversionisthefuturefit,whichmeansthatorganizationsadapttheirbusinessmodelsinsuchawaythattheycananticipateonchangesinrulesandregulations.Otherorganizationsmightchooseforthestretch-and-transformstrategy.AnexamplethathasbeengivenbyHuijben,Verbong,andPodoynitsyna(2016)isthepossibilityforresidentsinFlanderstospreadtheinvoiceovertwoyears,sotheycouldavoidthemaximumcapsetfortaxdeduction.This is identifiedasanstretchstrategywith incrementalbusinessmodelinnovation,whichrequireschangesintheinternalorganizationandthevaluepropositiontothecustomer.Byincreasingthedepthorwidthoftheavailablenicheshieldinginstruments,opportunitiescanbeexploitedthroughminorbusinessmodeladaptions.Amoreradicalstrategyisthestretchstrategywithradicalbusinessmodelinnovation,whennewtechnologiesenabletheimplementationofnewbusinessmodels.Theorganizationstrivestoexploitnewopportunitiesinnewways.Athirdstretchstrategythatcanbeadoptedistoopenlycrossthebordersoftherulesandregulationsinordertostartadiscussion


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and expand the existing rules and regulations. This strategy is officialy illegal and long term financialbenefits are not always guaranteed. The relationships between the business model and rules andregulationsareshowninfigure8.

Figure7:Influenceofrulesandregulationsonthebusinessmodel(Huijben,Verbong,&Podoynitsyna,2016)

Huijben,Verbong, andPodoynitsyna (2016) concluded that rulesand regulationsdonotaffect all theelementsofthebusinessmodel,usuallyoneortwoelementsareaffected.Figure8showsthatthelevelofnicheshieldinghasapositiveimpactonthefinancialmodel,whilemainstreamrulesandregulationsarenegatively related to thatbusinessmodelelement.Thevaluepropositioncanbeaffectedaswell,which is linked to the chosen strategy to dealwith rules and regulations. Businessmodel innovationrequiresacertainadaptionwithinthevaluepropositiontothecustomer.

InadditiontoHuijben,Verbong,andPodoynitsyna(2016),Hopkins(2016)statedthatbusinessmodelscanbeblockedorevenbestoppedbyregulatoryroadblocks.Thepossibilityofblockageisaseriousthreattobusinessmodelinnovationandtounderlinethisstatementsheprovidedthreeexamplesofstrategiesthathavebeenfollowedbystartups.Thestartup23andme launchedself-testingtestkitsasawayforcustomersto learnaboutgenetics,butunfortunatelythesekitswerenotFDA-approved.Asaresultofregulatoryregime23andmewasforcedtoshutdown,butinsteadofcompletelyleavingthemarkettheyadaptedtheirbusinessmodelwiththeintegrationofrulesandregulation.AftertwoyearsofintensivecommunicationandcooperationwiththeFDA,theyrelaunchedatestkitwhichmetthesetstandards.AnotherexampleofstrategiescanbefoundwithinthebusinessmodelofUberandAirbnb.ThestrategyofUberandAirbnbaremoreorlesssimilartoeachother,howeverthestrategyofUberismoreaggressive.Theyfighteachregulativechallenge,onebyone.Sortoflikepullingonecardatatimefromahouseofcards,lookingforwardtothedayitwillcollapse.ThethirdstrategyischosenbyAereo,whorentedeachofitscustomersamicro-antennatostreamover-the-airTVstations.Aereoaimedatapotentialloopholein theCopyrightActof1976,but failed toexploit that loopholeand lostall legal cases.Basedon thestrategiesofthesestartups,Hopkinsconcludedthattwoaspectsarecrucialforthebusinessmodel.First,anticipateregulatoryissueswhilestilldesigningandtestingthebusinessmodelandsecond,understand


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how to work with government. These aspects result that, based on the strategy chosen by theorganization,rulesandregulationsmightinfluencethevalueproposition,thedeliverymethod(channels),andkeyactivities.Whencommunicationandcooperationwithgovernmentsandagenciesispartofanorganization’s strategy, thekeypartnerelementof thebusinessmodel is influencedaswell (Hopkins,2016).Anoverviewoftheorganization’sstrategytodealwiththeregulatoryregimeandtheinfluencedbusinessmodelcomponentsareshownintable5.

Table5:StrategiesandbusinessmodelcomponentsAuthor Strategy Businessmodelcomponents

influencedHuijben,Verbong&Podoynitsyna(2016)*

Fit-and-conform ValuepropositionCustomerinterfaceInternalorganizationExternalvaluechainFinancialmodel

Futurefit CustomerinterfaceFinancialmodel

Stretch–Incrementalbusinessmodelinnovation

ValuepropositionInternalorganizationFinancialmodel

Stretch–Radicalbusinessmodelinnovation

CustomerinterfaceInternalorganizationExternalvaluechainFinancialmodel

Stretch–Openlyillegaloperationofbusinessmodel

InternalorganizationExternalvaluechainFinancialmodel

Hopkins(2016) Fit-and-conform ValuepropositionSupplychainFinancialmodel

Fightthelaw CustomerinterfaceSupplychainFinancialmodel

*NotethatHuijben,Verbong&Podoynitsyna(2016)havedividedthebusinessmodelintofiveparts:Valueproposition,customerinterface,internalorganization,externalvaluechain,andfinancialmodel.Theinternalorganizationandexternalvaluechainformthesupplychaintogether,whichistheterminologyusedinthisresearch.Nodistinctionhasbeenmadebetweenthetypesofbusinessmodel,onlybetweenthedifferenttypesofstrategiestodealwiththeregulatoryregimes.

2.4.5 NeedforrulesandregulationsPorterandvanderLinde(1995)arguethatenvironmentalregulationcanbeprofitabletoanorganizationthrough an increase in resource productivity, and that it will transcend the costs of compliance. Thequestionthatautomaticallyrisesistherealneedforrulesandregulations,becausecompaniescanstrivetoimprovetheirresourceproductivitywithoutanyformofrulesandregulations.Althoughthesituationwithout rules and regulations and still improved resource productivity is labeled as ideal, this is notrealizable.Thismightnotberealizedsincenotalltheopportunitieshavebeendiscoveredwithoutthe


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existence of rules and regulations, managers not always have perfect information available, and theorganizationalincentivesarenotalwaysalignedwithinnovating.Sixdifferentreasonsaredistinguishedtoemphasizetheneedforrulesandregulations.

Thefirstreasonistocreatepressurethatmotivatesorganizationstoinnovate.Pressurefromoutsideanorganization increases creative thinking and the innovation capacity, which will lead to overcomingbarriers. Secondly, it alsomakes organizations aware of resource inefficiencies and the possibility oftechnologicalchangeand improvement.Thethirdreason isto improveenvironmentalquality,even incases when the costs of compliance are high in comparison with the improvement in resourceproductivity.Fourth,theneedforenvironmentalrulesandregulationscanalsobefoundintheneedtomakesurethatproductandprocessininnovationsgeneralwillbecomemoreenvironmentalfriendly.Thefifthreasonistocreatedemandforenvironmentalimprovement,whilethelastreasonistomakesurethatallorganizationsfacethesamebarriersduringthetransitionperiodofenvironmental innovations(Porter&vanderLinde,1995).

FormulationofrulesandregulationsAlthoughrulesandregulationscanpromote innovation,resourceproductivity,andcompetitiveness, itshouldhaveaclearpurposeanditshouldbeformulatedwell.Forexample,rulesandregulationsshouldbe focusedonoutcomesandnotontechnologies.BestAvailableTechnology (BAT)andBestAvailableControlTechnology(BACT)implythatthereisoneoutstandingtechnology,butthisapproachdoesnotnecessarilyleadtothebestoutcome.Thereforeitshouldaimforthebestoutcome.Theformulationofrulesandregulationsshouldbestrictinsteadoflax,becausestrictformulationpromoteinnovationmorethanlaxdoes(Porter&vanderLinde,1995).

Incrementalintroductionofrulesandregulationsismoreeffectivethanacompleteintroductionatonce,since it gives organizations more flexibility and it forces them less to innovate hastily. During theintroduction,marketincentivesshouldalsobeincorporated.Theseareveryeffectiveandencouragetheuseoftechnologiesthatexceedcurrentstandards.However,theuseofthesemarketincentivesandtheintroductionofrulesandregulationscanbebestdoneincooperationwithothercountries,becauseitisimportanttominimizecompetitivedisadvantagesthatoccurduetotheintroductionofthenewrulesandregulations.Foreignorganizationsmightbenotfamiliarwiththesamestandardsandthereforemightfacecompetitivedisadvantages(Porter&vanderLinde,1995).

Anotherimportantfacetoftheintroductionofrulesandregulationsistostabilizetheregulatoryprocessandmakeitpredictable.PorterandvanderLinde(1995)arguethattheregulatoryprocessmightbeasimportantastheregulationsitself.Theparticipationoftheindustrycanbeusefulfortheprocess,becauseregulatorsandtheindustryshouldcooperate.Thereforeamongregulatorsstrongtechnicalcapabilitiesshould be developed, so regulators understand what drives organizations and what createscompetitiveness.Duringtheregulatoryprocess it iscrucial tominimizetimeandresourcesconsumes,becausethiscanbeverycostlyforanorganization(Porter&vanderLinde,1995).


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2.5 ConclusionAn increased interest inglobalwarminghas led toan increased interest inenvironmentaleconomics,sustainable development, and corporate social responsibility. The development of sustainableinnovations isbecomingmoreandmore important,andbesideseconomicprofit italsobringssocietalprofits.Forinnovationswithoutasustainablebase,thebusinessmodelisanimportantfactorformarketsuccess. For sustainable innovations the development of a solid green business model is evenmoreimportantduetotheadditionofsocietalandenvironmentalaspects.Theintegrationofenvironmental,societal,andeconomicrelationshipsbetweentheorganizationanditsstakeholdersiscrucialandtheseare integrated throughthewholebusinessmodel. Itneeds tobe implementedwithinall thebusinessmodelelements.

Several external factors influence the greenbusinessmodel and the commercializationof sustainableinnovations.Factorsliketypeofeconomy,marketposition,andcustomerpreferenceshavetobetakenintoaccountwhendesigningthebusinessmodel,buttheexistenceofenvironmentalrulesandregulationshastobeseriouslyconsideredasimportantthemewithinthebusinessmodel.Itisanfactorthathasbeenintroducedbyanexternalactor,whichhasshapedcertainboundariesfortheorganization.Ithasaseriouseffectontheorganization’sinnovationcapacityanditsgreenbusinessmodel.Whilerulesandregulationsmightbepositivetoanorganization,sinceitforceshertoinnovate,itcanalsobenegative,becauseitlimitsthecompanyandincreasesR&Dexpenditures.

Asalreadystated,theimportanceofthebusinessmodelcannotbeunderestimated.Rulesandregulationsinfluencetheelementsofthebusinessmodel,thevaluepropositiontostartwith.Thestrategychosenbythe organization to deal with rules and regulations is the main input for a change within the valueproposition.Howthevaluepropositionis influenceddependsonthetypeofstrategy,forexamplethestretch-and-transformstrategy.AnexamplethathasbeengivenbyHuijben,Verbong,andPodoynitsyna(2016)isthepossibilityforresidentsinFlanderstospreadtheinvoiceovertwoyears,sothisisanessentialchangewithinthevaluepropositiontothecustomer.Anotherelementthatcanbeinfluencedbyrulesandregulationsispartofthecustomerinterface,knownaschannelsordistributionchannels.Iftherulesandregulationforcesorganizationtobecomemoresustainable,otherchannelsmightneedtobeusedtodelivervaluetothecustomer.Oldchannelsdonotsuitanymore,sincethesemightbenotsustainableenough.

Keypartnersandkeyactivitiescanbeinfluencedaswellasaresultofenvironmentalrulesandregulations.The strategy to intensify the communication with governments or agencies led to a situation thatgovernments or agencies might become key partners within the chain. The communication andcooperationwith them logically results in a key activity for the organization and her employees. Thestrategyofanorganizationhowtodealwith rulesand regulation isalso reflectedwithin the financialmodel.Mainstreamrulesandregulationsresultinincreasedcosts,definitelywhentheorganizationstrivesto fightagainst it insteadofusinga fit-and-formstrategy.Actingwithinaniche ispositivetowardsanorganization’s revenue, since it shields the innovations against mainstream selection pressures. The


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possibleexistenceofgovernmentalgrantsisattractivetoanorganizationaswell,sinceitincreasestherevenuestream.

Whiletheorganizationaimstodesignthegreenbusinessmodelinthebestpossibleway,itisimportantfor themtounderstandwhat consumersdrive toadopta sustainable innovation.For theadoptionofsustainableinnovation,threetypesofattributesareimportant(Noppersetal.,2015).Theseareknownas instrumental, environmental, and symbolic attributes. Instrumental attributes are related to theperceived functional outcomesof using a sustainable innovation,environmental attributes reflect theperceivedoutcomesfortheenvironmentofusingasustainableinnovation,andsymbolicattributesarerelatedtotheperceivedoutcomesofusingasustainabletechnologyforconsumer’sidentityandsocialstatus.Basedonthedegreetowhichaconsumerisrelativelyearlyinadoptingnewideasincomparisonto other consumers, Rogers (2003) categorized adopters of innovations into five different categories,known as innovators, early adopters, earlymajority, latemajority, and laggards. Itmight be that theexistenceofenvironmentalrulesandregulationscanalsobeafactorthatforcesconsumerstoadopttheinnovation,whethertheinstrumental,environmental,andsymbolicattributesarepositivelyevaluatedornot.Italsomightforceconsumerstoadoptearlierthantheywouldhavedonewithouttheexistenceofenvironmentalrulesandregulations.Theintroductionofrulesandregulationsisthereforeinfluencingtheadoptionprocessofconsumers,andmustbe taken intoaccountbyorganizationswhendesigning thebusinessmodel.


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3. MethodologyVan Aken (2004) made a distinction between explanatory sciences and design sciences. Explanatorysciencesaimatdevelopingvalidknowledgetodescribeandexplaincertainempiricalphenomena,andusuallyfollowtheempiricalcycle.Thephasesoftheempiricalcycleareasfollows:Theresearcherchoosesaphenomenon,makesaresearchdesign,makesempiricalobservations,developsatheorybyinduction,deducesfromthattheoryempiricallyobservations,andthentestthesehypotheses.Ontheotherhand,design sciences are the development of valid knowledge to design solutions to field problems.Researcherswithanaimtodesign,usuallyfollowthereflectivecycle.Researchersfollowingthereflectivecyclechooseabusinessproblem,solve thatproblemusing the regulativecycle, reflecton the results,determinedesignknowledge,andthenstartanewprojectwiththesametypeofproblem.Asstated,thereflectivecyclecontainsanothercycle,whichisknownastheregulativecycle.Theregulativecycleisaproblem-solvingcycle,andcontainstheproblemchoice,diagnosis,planofaction,implementation,andevaluation(vanAken,Berends,&vanderBij,2007).Thereflectiveandregulativecycleareshowninfigure9.

Figure8:Reflectiveandregulativecycle(vanAken,Berends,&vanderBij,2007)

Theaimwithinthisresearch is toanalyzethe influenceofenvironmentalrulesandregulationsonthebusinessmodelandtodesignagreenbusinessmodelthatcanbeusedtocommercializehybridferries.For thispurpose thebest cycles to followare the reflectiveand regulative cycle. Theproblem forRHMarineNListocommercializetheirhybridpropulsionsystemsforferries,andbasedonacasestudyofelectricbussesagreenbusinessmodelcanbedesignedsuitedforthehybridpropulsionsystems.


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3.1 DatacollectionWithin literature,therehasbeenmadeacleardistinctionbetweenqualitativecollectionmethodsandquantitative collection methods. Qualitative collection methods focus on the discovery of certainphenomena,whilequantitativemethodsdescribethenumberoramountofthesephenomena(vanAken,2004).Thetypeofresearchdetermineswhichtypeofdata isrequired,andthereforewhichcollectionmethod should be used. For example, qualitative collection methods are very useful when studyingpeople,groups,organizationsorsocieties.Althoughqualitativecollectionmethodsareveryimportantforqualitativedatagathering,standardizationofthemeasurementinstrumentcannotberecommended(vanAken,Berends,&vanderBij,2007).

Forthisresearchthequalitativedatacollectionmethodinterviewinghasbeenchosen,becauseitprovidesthe most useful data to investigate the relationship between the green business model and theintro

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