The Interactive Impact of Regulation, Entrepreneurship, and Cultural Values on Technology Adoption: Renewable Energy in the EU

Abstract How can diverse sources legitimize new technology when it lacks economic parity? Government policies that endorse nascent technologies play a central role through regulatory legitimation. Yet, we know less about whether inducement policies that incentivize adoption or imposition policies that mandate it are more effective, and how that effectiveness depends on other sources of legitimation. We address this question by examining renewable energy adoption by incumbent electric utilities in the European Union from 1998 to 2009, a period when renewable energy had not yet achieved cost parity with fossil‐fuel alternatives. We find that inducement policies were generally more effective than imposition policies in fostering adoption. Further, entrepreneurial entry strengthened the impact of inducement policies through pragmatic legitimation, while pro‐environment cultural values strengthened the impact of imposition policies through normative legitimation. By showing how regulatory, pragmatic, and normative legitimation sources interact to shape technology adoption, we offer insights for accelerating technology transitions aimed at combating grand challenges such as climate change.