Drivers of Innovation of Biofuel Ethanol
A comparative analysis between the U.S. and Brazil
Elena M Berger (elena.berger@gatech.edu)
School of Public Policy, Georgia Institute of Technology
The United States remains dependent on energy sources derived from fossil fuels. The
transportation system in particular is 98% dependent on oil. This overreliance on oil has raised
concerns over the long term impact of energy security and climate change.
Biofuels have been considered a short term solution to address the increasing demand of fossil
fuels for transports in the U.S. However, the innovation of biofuels faces barriers intrinsic to the
innovation process of low carbon technologies. Alternative fuels derived from biomass struggle to gain
market participation because the institutional environment does not facilitate the adoption of routines
and practices that reward the use of alternative fuels over gasoline.
Given the potential benefits of biofuels to replace the growing demand of gasoline, the study of
the dynamics of innovation of biofuels deserves particular attention. The innovation system school
argues that the process of innovation is complex, long, and does not happen in isolation. Some studies
of innovation of low carbon technologies use the functions of innovation systems, that is, they evaluate
the activities related to innovation performed around a technology. The functions of innovation
literature argues that a performing innovation system requires fulfillment of a number of functions or
activities over time: 1) Entrepreneurial activity to displace the incumbent technology; 2) Knowledge
creation and diffusion to stimulate learning by experimentation and learning by interaction; 3)
Guidance of research to guide strategic decision making and stimulate positive expectations around the
new technology; 4) Market formation to create a niche market for the new technology; 5) Resource
mobilization to stimulate investments in material and human resources; 6) Legitimation of the new
technology to help break the inertia of the new technology within the institutional and socio-economic
environment; and 7) Building of capabilities in the downstream market to stimulate the alignment of
goals between users and producers of the emerging technology;
The functions of innovation framework has been used to evaluate the dynamics of a number of
low carbon technologies, including biomass digestion and biomass co-firing, biomass gasification,
biofuels, and biopower. In those studies, the function Guidance of research stood out as a trigger of an
innovation cycle, that is, positive expectations about an emerging technology stimulate investments in
R&D (knowledge creation and diffusion), as well as mobilize resources – material and human – around
the emerging technology, boosting entrepreneurial activity, thus increasing even more positive
expectations around the new technology. The function Building of capabilities in the downstream
market has been proposed by this author somewhere else. Results of the study showed that this
function has a positive influence in the innovation process of biofuel ethanol in Brazil.
Using newspaper articles from the U.S. and from Brazil since 1975, this paper uses the
functions of innovation systems approach to compare the trajectory of innovation of biofuel ethanol
between the U.S. and Brazil during the last thirty years. It will show results for all functions, but it will
give special emphasis to the functions Guidance of research and Building of capabilities in the
downstream market.
The functions of innovation is an evolutionary framework that can only be tested by a sequence
of causal relationships with self-reinforcing mechanisms. In this way, explanations are derived from
patterns of positive or negative feedback. By plotting the evolution of functions of innovation over
time, one can identify the most relevant functions. The research uses the New York Times and the
Washington Post as sources of newspaper articles for the United States, and uses O Estado de Sao
Paulo as a source of newspaper article for Brazil. All three sources were searched from 1975 until
2008. It is assumed that every newspaper article represents an empirical observation of an event. The
methodology follows the steps:
1) Bibliographic research into databases to find electronic versions of newspaper articles covering the
innovation of biofuel ethanol in the U.S. and in Brazil between 1975 and 2008. Manual search into
archives for the early period when necessary;
2) Coding of newspaper articles (empirical representation of events) according to the functions of
innovation;
3) Data analysis and plotting;
4) Interview with specialists to complement data from newspaper articles;
5) Process analysis to develop a narrative story line for the U.S. and Brazil using a chronological
sequence of events between 1975 and 2008;
6) Comparative analysis: using the functions of innovation to trace the trajectory of innovation of
biofuel ethanol in the U.S. and Brazil.
The paper will draw conclusions from the analysis and discuss the policy implications for the
development of biofuels in the U.S.
Bibliography

Berger, Elena (2010). Dynamics of Innovation of Biofuel Ethanol. Three decades of experience in the U.S. and in Brazil.
Doctoral Dissertation. Georgia Institute of Technology. Atlanta, GA, U.S.

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