Page 77 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.72, # 2, 2015, pp. 73-86

actions towards such changes. The study focuses on the relationship between oil
prices and policymakers‟ and entrepreneurs‟ actions towards innovation in energy
sectors. They use data such as public research and development expenditures and
patents to gauge the relationship and findings support positive relationship [7].
Policymakers‟ actions are good reason that can determine renewable energy
innovation. Many countries today try to focus on renewable energy more and
governments have tools to motivate innovation and investments in these sectors.
Dependance on oil creates unstability and uncertainty regarding future and more
risks. In contrast, renewable energy is something that countries and companies rely
on long-term and such „dependance‟ would not create similar risks. Governments
through subsidies, creating knowledge hubs, helping universities, financing projects
can direct innovation towards required fields.
When looking at policymakers‟ actions towards renewable energy from
economic aspect, it is also important not to forget environmental benefits of
alternative energy sector. Environmentalists and some representatives of
governments focus on side-effects of custom energy and try to shift carbon-free
energy sources. Here some might question why people just simply don‟t shift, but
need innovation for this purpose. As noted above, costs are many times higher and
innovation can decrease cost differences. Johnstone, Haščič and Popp study
influences of environmental policies on renewable energy innovation. According to
their analysis based on patent applications as determinant, various policy
instruments have impact on innovation in renewable energy sector. Further, while
broad-based environmental policies have special effect on innovation in areas which
compete with custom energy sources, specific and targeted policies have effect on

innovation in more costly renewable energy technologies [8]. Another important
factor that can influence renewable energy innovation (alone or together with other
drives) seems to be environmental policies.
According to Induced innovation theory, many economic factors, including
input prices, market demand and etc. influence companies‟ focus on research
activities. Lichtenberg analyzes effects of energy prices on research and
development by United States companies and finds that, industries where price
increases are witnessed more also show high tendency and growth in R&D

expenditures [9]. R&D expenditures solely cannot determine innovation, as
innovation is also dependent on many other factors, such as how innovation-open
the sector or technology. For example, if we spend the same amount of money for

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