Innovation risk path assessing for a newly emerging science & technology: Illustrated for dye-sensitized solar cells

For “Newly Emerging Science & Technologies” (“NESTs”), uncertainty is the major challenge. Technological innovation for NESTs faces many kinds of risks that dramatically affect their development paths. This paper combines methods of risk utility theory and technology path research and explores a new innovation risk path modeling method for NEST development. Here we apply selected tools from risk utility theory and technology path research to the NEST of special concern—Dye-Sensitized Solar Cells (DSSCs). The case for DSSC commercialization is promising, but challengeable. The prospects for future development of DSSCs are good, with identifiable markets. Multi-party collaboration appears necessary in order to overcome challenges to development. If key technology component selection, technical stability, maturation rate, and other core issues can be improved, commercial innovation has tremendous potential. However, significant competing technologies as well as uncertain environmental influences complicate matters. This combination of qualitative and quantitative approaches should yield robust assessment and should allow for better communication of those results. It is useful for technology managers and policy-makers to grasp the development process and prospects for a specific NEST to facilitate innovation management. INTRODUCTION “NESTs” are a loose category to which our European colleagues are drawing special attention (Jacobsson and Johnson, 2000; Foxon et al., 2005; Markard, 2006; Robinson and Propp, 2008). Classical technology forecasting methods were devised to address incrementally advancing technological systems (e.g., Moore’s Law well describes some six decades of semi-conductor-based advances). Those methods keyed on technical system parameters, somewhat more than on socio-economic system aspects, because they were initially driven by Cold War tendencies to concentrate on functional gains more than on cost and market issues. Today’s NESTs are more apt to incorporate science-based advances (e.g., in the biotechnologies and nanotechnologies), which tend to occur sporadically, sometimes with disruptive effects. Analyses of NESTs are often related to economic opportunities, with significant concern for identifying and mitigating potential “unintended, indirect, and delayed” societal consequences. We seek to contribute to the development of analytical tools to relate early-stage scientific advances to long-term implications (i.e., potential applications and their implications). The previous research provides the research base and useful insights on risk indicator and system, project evaluation methods, the concept of risk, risk identification, risk assessment, and risk early warning. However, these previous studies all assumed a static point of risk assessment without consideration of effectiveness of utilities of different risk levels in different stages of the dynamic technological development. At this point, no systematic research method on dynamic development of new technology products has been devised. To solve this problem, we attempt to evaluate the effectiveness of the risks in the process of development of new technological products from the point of view of the technical pathway. This study combines the theories of risk utility evaluation and technological pathway and contributes to the literature on those two theories. Here we applied selected tools from risk utility theory and technology path research to the NEST of special concern—Dye-Sensitized Solar Cells (“DSSCs”). BACKGROUND Innovation risk (1) Theoretical risk of technology innovation Technological innovation is a high-risk activity. Mansfield conducted a statistic analysis in 1981; the statistic result shows that, in the technology R&D stage, only 60% of high-tech research experiences success, and only 30% of the successful researches can be successfully applied to market needs and be developed into products accordingly. However, only 20% of those high-tech products ultimately see success on the market. That is, from the beginning of new technology research and development to the final market, the success rate amounts to less than 2.2% (Chen and Liu, 2007). Technological innovation risk refers to the possibility of loss that may occur in the process of technology innovation. This risk is due to various uncertain factors, including the difficulty of the project and the constraints of innovation capabilities, which may result in the revocation, suspension, or failure of innovation activity or its failure to reach the intended target (Xie, 1999). For new and emerging technologies, which hold a great inherent uncertainty, understanding the role and impact of such risks is particularly important. Management of technological innovation aims to reduce the risk of innovation and seeks the ultimate success of innovation. Technological innovation and rational risk evaluation are not only conducive to risk prevention, but also improve the success rate of technological innovation and the benefits of technological innovation. These steps are seminal to technology innovation management. (2) Previous research on technology innovation risk By now, the risks of technological innovation have been researched a lot around the world. In summary, the main research content focuses on the following areas: (a) Many scholars have described and summarized the details of risk-related concepts, but so far a conclusive definition and connotation of technology innovation risk has not been achieved. At times, points of views conflict or contradict each other (Dou, 2002); (b) Extant research literature on risk identification has mainly focused on analysis and identification of risk factors, methodologies of risk identification, and risk indicators system (Moriarty and Kosnik, 1989); (c) Researchers have systematically analyzed risk assessment models and evaluated methods of technology innovation in previous research and have established a relatively comprehensive risk assessment method and model (Ward, 1999); (d) Scholars have performed in-depth studies on risk warning systems but have mainly concentrated on project risk early warning, business risk daily early warning for corporations, macroeconomic risk early warning, and early warning for financial risks and various disasters early warning (Zhu and Zhou, 2005). So, we firstly propose the general model for identifying the risk utilities pathway of technology, and we also propose the specific model for identifying the risk utilities pathway for new technology products. Based on this model, we try to forecast and plan the risk-utility pathway for new technology products. METHODOLOGY AND DATA: innovation risk path This work explores a new technology innovation pathway from the perspective of risk-utility that aims to uncover how the NESTs can overcome the various risks in different stages of technology development. The risk-utility pathway reveals the reason for success or failure of the NESTs and the utility for different stages. It represents a new breakthrough for NEST pathway research. Following are the research outlines. (1) The stages of technological innovation: Technological innovation is a complex, continuous, long-term process. In order to study the regularity of the process, separate stages should be identified and analyzed. According to their different needs, research scholars from various countries have divided the development of technology products into stages. In this research, we have divided the innovation process for NESTs into 3 stages: R&D Stage, Experimental Stage, and Industrialization Stage. In different stages, the kinds of risks and their respective intensities vary. For example, if the NEST has encountered great difficulties in its R&D stage, and it cannot overcome this risk, it is unnecessary to consider the risks of the Experimental Stage or Industrialization Stage. Therefore, the risks are considered for each stage individually and sequentially. As the system survives from the previous stage (a threshold is set), the next stage can be considered. Meanwhile, for each stage, a utility is used to value how successfully the NEST performs in this stage (if the utility could pass the threshold will determine the NEST would succeed or fail in this stage). (2) The risk classification in technological innovation: Many risk factors play into technological innovation, and these are especially influential in the case of NESTs. Previous scholars have classified the risks from different angles. Following Technology Delivery System (TDS) modelling (Ezra, 1975), we consider the risks to be technology risk, market risk, delivery capacity risk, policy risk, and competitor risk. Besides distinguishing five kinds of risks to be assessed, our model differentiates between the five risks as “fatal” or less serious, and their intensity varies in different stages, while it varies according to stages. If the NEST cannot survive from a fatal risk, it fails. On other hand, if it encounters a less serious risk, the utility will be decreased but will not break down. At the same time, those less serious risks play different roles in impeding a NEST; thus, we determine their weight in each stage. The impact of said less serious risks on the development of technology is determined by weight as it varies for the different stages as long as the risk's intensity does not lead to failure of the TDS. Fatal risks, on the other hand, cause serial problems to the system; meaning that if the NEST cannot pass one specific fatal risk, the whole TDS fails. (3) To identify the innovation risk pathway for NESTs: We use the mathematics format here to describe the research question. Firstly, we start by defining a few variables: a. the three stage are named as 1 S , 2 S , 3 S ; b. 1 U , 2 U , 3 U identify the utility of the NESTs in three stages and according to the utility theory 0 1 n U   ; c. 1 n P , 2 n P ,... ni P denote the different fatal risks in n S , whereas i denotes the number of the fatal risk in n S , and   ni U P denotes the utility of the NEST surviving from the fatal risk ni P in n S ; d. 1 n Q , 2 n Q ,... nj Q denote the less serious risks in n S , whereas j denotes the serial number of the less serious risk in n S , and   nj U Q denotes the utility of the NESTs after the less serious risk nj Q in n S , and 1 n A , 2 n A ,... nj A denote the weight of the different less serious risks in n S , where 1 2 3 ... 1 n n n nj A A A A      . The ideas explained above are illustrated in Figure 1. The aim of this study shown in this Figure is to see how the technology could overcome these risks in order to outline the technology development path. In each stage of the innovation risk model, we indentify the type and intensity of the different risks. For example, in the R&D stage, the first task for identifying potential risk is to establish if the policy will support this specific technology. If the outcome is positive, how much utility remains after surviving the policy risk determines whether the development continues or fails. Also, technology risk is another potentially fatal risk in the R&D stage. Delivery risk, market risk and competition risk are less important at the R&D stage; so weights are ascribed accordingly to represent the less serious risks’ impact on the development of technology. We identify the innovation risk model with the help if the following equations: a. First stage:               1 11 12 1 11 11 12 12 1 1 min , ,..., , ... i j j U U P U P U P U Q A U Q A U Q A            b. Second stage:   21 22 2 21 21 22 22 2 2 1 2 min ( ), ( ),..., ( ), ( ) ( ) ... ( ) ( ) 0.6 U 0 i j j U P U P U P U Q A U Q A U Q A if U             1 ( ) 0.6 if U     c. Third stage:   31 32 3 31 31 32 32 3 3 2 3 min ( ), ( ),..., ( ), ( ) ( ) ... ( ) ( ) 0.6 U 0 i j j U P U P U P U Q A U Q A U Q A if U             2 ( ) 0.6 if U     Therefore, we can discern the utility of the NEST under study in various stages of development and can also forecast how successful it will be throughout the whole technological innovation process.