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EGADE Business School, Tecnologico d,e Monterrey Doctorado en Ciencias Administrativas "Diffusion and adoption of renewable energy technolog1cal innovations in Urban Mexican households" Autor: Pável Reyes Mercado Director de la tesis: Dr. Rajagopal Biblioteca C-'lll:-t'V• Cl~ad de Méxk0..l Diciembre 2015 .H.Bcc:.mot constar que e.1 la, Ci~ de Mifudi;o, ,;l dÚl 28 de octubre de 2015. la alumna: Pável Reyes .Mercado S'lll1:oot6 el Exa.:inL"11 de Gnufo en dc:fi:ma de la T c=si:s titularl11.: "04ffilsion nod adopdo~ ol rt11twablc c:11cr¡y ú!cbnolo¡ical ::nOTI1tian1 in Urban Mn:Jcan llau,eboldt" ~11 como rtqwilito final pm In o~lón det Clttldo de: DOCTORADO EN C'JENCJAS ADMINJSTRA TIVAS Ante la evidcnci.o. prcscm.ada Cfl el ttllb&jo de ~sis y en ,;l p~ c:x1UDCn, d Comí# Examinador, preiid&do por cl Dr. Jorge P«-a Rubt, Agoilar, ha tomado la siguiunt-e resolucióo: Dr. Jorp N ble ~Uar Lecwr _j¡Gui-a ,rr/f Dn. lb411d Minl!ln'a Cattdo Lecr.on1 ll:G.lltllluNIIINltáoii ca .. , .... No.2UQl,E_IDdialil.i,-b, fol •Qf~,M931l'il c111ou,U11lllhlm (lei.ll1.oPM,C:.l'.1"3M\~0~ -..-.. (2) Declaration I certify that this work of that ofthe author alone; and has not been submitted previously, in whole or in part, to qualify for any other academic degree. The content of this dissertation is the result of work which has been carried out since the official beginning date of the approved research proposal. Ali editorial works carried out by other authors have been acknowledged. Pável Reyes Mercado December, 2015. [3] Dedication A mi mamá, Gracias. A 111 i hermano. (4) Acknowledgemen ts First and foremost, I feel profoundly indebted to Dr Rajagopal, whose guidance and teachings have nurtured my research production well beyond what I could have expected. I can't count the number of drafts upon which I have received his valuable and sharp comments. Working so closely has been one of the most satisfactory endeavors I have gone into. 1 also want to thank Dr Raquel Castaño and Dr Jorge Pérez Rubio for their availability and time toread and review my study. Many professors of EGADE Business School were so kind in providing me with valuable feedback sessions at different stages of this dissertat on. So, I am also thankful to ali of them. This dissertation also benefited from the comments I received in the conferences I attended during my PhD studies. To Prof Mishra in the lnstitute of Public Enterprise, India for inviting me to spend a short but fruitful research staying at his Institute. I tinally want to thank to DCA Department in EGADE Busin,~ss School CCM for their monetary support in paying for scholar fees and conferences attendances and CONACYT for overall financia( support. [S] Glossary of Symbols and Acronyms a AVE CB-SEM f H E A PLS , q- RET SEM SmartPLS Cronbach's alpha Average Yariance Extracted Standardized path coefficient Covariance-Based Structural Equation Modeling Effect size statistic Hypothesis Generic endogenous variable Error term in the measurement model Loading of the endogenous variable Partial Least Squares Change in the predictive relevance (blindfolding test) Test for predictive relevance for an estimated PLS path model Measurement of the proportion of variability explained in the dependent variable Renewable Energy Technology Structural Equation Modeling Statistical software package for solving PLS measurement and structural models [6] Table of contents Declaration Dedication Acknowledgements G lossary of Symbols and Acronyms Table of Contents List of Figures List of Tables Abstract Table of Contents CHAPTER l. INTRODUCTION ........................................... .. ...................................... 17 1.1 Overview .......................................................................................................... 17 1.2 Background of the research ............................................................................ 17 1.3 Current context for the research ....................................................................... 20 1.4 Motivation for the research ..................... .. ........................ .. .................. .. ........ 22 1.5 Description of the research problem ............................................................... 23 1.6 Research objectives and research questions ................................................... 23 1. 7 Suggested methodology .................................................................................. 25 1.8 Definitions and terminology ........................................................................... 25 1.9 Contribution of the research ........................................................................... 27 1.1 O Li1nitations ...................................................................................................... 28 1.11 Structure of the Dissertation ........................................................................... 29 CHAPTER 2. LITERA TURE REVIEW ....................................................................... 31 2.1 Overview ......................................................................................................... 31 2.2 Theories and models on RET diffusion and adoption ..................................... 31 2.2. 1 Theory of choice ........................................................................................... 31 2.2.2 Stated preferences ................................................. .. ..................................... 33 2.2.3 Theory of reasoned action ............................................................................ 34 2.2.4 Theory of planned behaviour ....................................................................... 36 2.2.5 Diffusion theory ........................................................................................... 36 [7] 2.2.6 ') ., ~ . .) 2.4 Social network theory ................................................................................... 40 Convergence of theories and models on consumer adoption decision ............ 41 Concluding co1nn1ents ..................................................................................... 43 CHAPTER 3. DETERMINATION OF RELATIONS BETWEEN CONSTRUCTS ... 44 3.1 Factors influencing RET adoption ................................................................... 44 3.1.1 Consu1ner knowledge ................................................................................... 44 3.1.2 Consumer uncertainty .................................................................................. 44 3.1.3 Consumer asymmetric behaviour. ................................................................ 45 3.1.4 Attitudes towards RET adoption .................................................................. 45 3.1.5 Social influence ............................................................................................ 46 3.1.6 Beliefs about consequences .......................................................................... 47 3.1. 7 Belief norms and subjective norms .............................................................. 48 3.1.8 Perceived behavioural control ...................................................................... 49 3.1.9 lnnovation attributes ..................................................................................... 50 3.2 Overall research model to understand households· RET adoption .................. 51 3.3 Concluding re111arks ......................................................................................... 54 CHAPTER 4. METHODOLOGY .................................................................................. 55 4.1 Overview .......................................................................................................... 554.2 Methodological trends for assessing RETs adoption ....................................... 55 4.3 J ustification of the research paradigm and research clesign ............................. 56 4.4 lnstnunent design ............................................................................................. 57 4.4.1 ldentification and measure of constructs ....... ............................................... 57 4.4.2 lnitial items development .............................. ............................................... 57 4.4.3 Reflective versus formative measurement ................................................... 58 4.4.4 Product category to be studied .................................................................... 59 4.4.5 Face and content validity .......... .. ............. .. ....................... .. ......................... 60 4.4.6 Questionnaire pilot test... .............................................................................. 60 4.5 Sa1npling design .............................................................................................. 61 4.5.1 Sainpling context .......................................................................................... 61 4.5.2 Sa1nple type .................................................................................................. 61 4.5.3 Sample size ................................................................................................... 61 4.5.4 Unit of analysis ............................................................................................. 62 4.5.5 Possible sampling errors ............................................................................... 62 (8) 4.6 Data collection procedure ................................................................................ 63 4.7 Demographic profile ofthe collected sample .................................................. 63 CHAPTER 5. RESUL TS ANO DISCUSSION ............................................................ 65 5.1 5.2 5.3 5.3.1 5.3.2 5.3.3 5.3.4 5.3.5 5.3.6 5.3.7 5.3.8 5.3.9 5.3.1 O 5.3.11 5.3.12 5.3.13 5.3.14 5.3.15 5.3.16 5.3.17 5.3.18 5.4 5.4.1 5.4.2 5.4.3 5.5 5.6 5.6.1 5.6.2 5.7 Overview .......................................................................................................... 65 Model description: Descriptive statistics model results ............................ .. ..... 65 Descriptive analysis of variables .................................................................. 65 Cognitive variables ....................................................................................... 65 Belief about consequence of adopting RETs ............................................... 66 Consumer's normative belief.. ...................................................................... 66 Consumer's subjective norm .................... ...... .. ...... ...... .. ...... ................... ..... 67 Behavioural control ...................................................................................... 67 Social network influence .............................................................................. 68 Attitudes towards adopting RETs ................................................................ 69 Behavioural intention to adopt RET ............................................................. 70 I nnovation attributes ................................................................................. .... 70 Cotnpatibility ...... .......................................................................................... 71 Complexity ................................................................................................... 71 C)bservability ................................................................................................ 72 Triability ....................................................................................................... 73 Relative advantage ....................................................................................... 73 Relational variables ...................................................................................... 74 Consu1ner knowledge ................................................................................... 74 Consumers' uncertainty in adoption decisions ...... ....................................... 75 Asymmetric behaviour of consumers ........................................................... 75 Model description: preliminary analysis results ............................................. 76 Missing values .............................................................................................. 76 ·Nonnality test ............................................................................................... 77 lnspection of correlation matrix .................................................................. 77 Analytical methodology .................................................................................. 78 Analytical 1nodel ............................................................................................. 81 Assu1nptions .............................................................. .. ................... ...... ....... 81 Modelling of RET adoption ........................................................................ 81 Model evaluation: Measurement model results .............................................. 84 [9] 5.7.1 5.7.2 5. 7.3 5.7.4 5.7.5 5.7.6 5.7.7 5.7.8 5.7.9 5.7.10 5.7.11 5.7 .12 5.7.13 5.7.14 5.7.15 5.7.16 5.7.17 5.7.18 5.7. 19 5.7.20 5.7.21 5.7.22 5.7.23 5.7.24 5.7.25 5.7.26 5.8 5.8.1 5.8.2 5.8.3 5.8.4 5.8.5 5.8.6 Reliability 1neasures ........ .. ..................................... .. ............ ............... ........ . 84 Cronbach's alpha ........................... .... ..... .......................... ............................ 84 Composite reliability ............... .......... ............................... .................... ........ 85 Average variance extracted .. ..... ..... ............... ............ .. .... .......................... ... 86 Cognitive variables ....................................................................................... 86 Belief about consequence of adopting RETs ............................................... 86 Consumer's normative belief.. ................................ ....... ... ....... .. ..... ......... ..... 87 Consumer's subjective norm ........... .. ........ ....................... ............ .... .... ....... 87 Consumer's behavioural control .................................................................. 87 Social network influence ............. .. ............................. .. ....... .. .. .......... .......... 88 Attitudes towards adopting RETs .................. .............. ............................. .. 88 Behavioural intention to adopt RET ............................................................ 89 Innovation attributes ............................................... ... ... ..... ..... .... ... ...... .. .. ... .. 89 Compatibility .............................. ..... .......... ............. .. ..................... ....... .. ...... 89 Con,plexity .................................................................................................. 90 Observability ............................................................................................... 90 Triability ...................................................................................................... 91 Relative advantage ....................................................................................... 91 Relational variables ... .................................... .. ... .... ..... ...... ........ ............ ..... .. 92 Consu111er·s knowledge ........................................... ................ .... .. .. ...... .... .. . 92 Consu111er's uncenainty ......................................... .. ....... .............................. 92 Asymmetric behaviour of consumers ..................... ....... .... ........ .......... ......... 93 Discrilninant validity .................................................................................... 93 Fornell-Larcker criterion .............................................................................. 93 Cross loadings .................................... .. .................. ............ ......... ................. 94 Conclusion on the measurement model results ............................................ 96 Model evaluation: Structural model results ..................................................... 97 Hypotheses testing for equation 3 ................................................. ...... ......... 98 Hypotheses testing for equation 4 ...... ......... ................ ...................... ........... 99 Hypotheses testing for equation 5 .... .. ....... ...................... .......... ....... .......... 100 Hypotheses testing for equation 6 ............................................................. 100 Hypotheses testing for equation 7 .. ...... ......................... .. .......................... . 103 Consumer heterogeneity ............................................................................. 106 (10] 5.8.7 Confirmatory TETRAD Analysis .............................................................. 113 5.8.8 Effect size f2 ...•..•..•..••••.•..••.••.•....•••..••..........••....•...•.....•...........•..•••........•..•. 115 5.8.9 Predictive relevance Q2 ...••...•....••••••.....••..•...•..•..•........•••..•...••...••.•...•.....••.• 117 5.8.1 O Effect size for predictive relevance q2 ........................................................ 118 5.8.11 Conclusion of the structural model results ................................................. 120 CHAPTER 6. MANAGERlAL IMPLICATIONS ....................................................... 121 6.1 Salient features of dissertation ....................................................................... 121 6.2 Contribution of the dissertation ..................................................................... 127 6.3 Managerial implications of the main findings ............................................... 127 CHAPTER 7. CONCLUSlONS ......................................... .. ........................................ 130 7.1 Study li1nitations ......................... ................... .................... ............................ 130 7.2 Future research ............................................... .................... ............................ 132 7.3 Epilogue ......................................................................................................... 133 APPENDICES .............................................................................................................. 135 Appendix A. lnstrument uti lized for data collection ................................................ 135 Appendix B. Covariance matrix for the study indicators ......................................... 140 Appendix C. Academic presentations and publications ........................................... 141 REFERENCES ............................................................................................................. 142 (11] List of Figures Figure 1.1 Social acceptance of renewable energy innovation. Adapted from Wüstenhagen, Wolsink, & Bürer (2007) ........................................................................ 19 Figure 2.1 Utility functions of individuals. Adapted from Edwards (1954) .................. 32 Figure 2.2 Framework to predict specific intentions and behaviours. Adapted from Fishbein and Ajzen (1975) ............................................................................................. 35 Figure 2.3 Theory of planned behaviour. Adapted from Ajzen ( 1991 ) .......................... 36 Figure 2.4 Adopter categories vs. life cycle of innovations. Adapted from Rogers (1962) ............................................................................................................................. 37 Figure 2.5 Basic nodes in a social network. Adapted from Granovetter (1973) ............ 41 Figure 2.6 Complex network structures. Adapted from Granovetter ( 1973) ................. 41 Figure 2.7 Convergence oftheories in innovation adoption de,;ision. Author elaboration . ........................................................................................................................................ 43 Figure 3.1 Research model to analyse customer's RET adoption. Author elaboration .. 52 Figure 4.1 Reflective and formative measurement orientatiom .. Adapted from Bollen and Lennox ( 1991 ) ......................................................................................................... 59 Figure 5.1 Path diagram for an example oftwo equations and three latent variables .... 82 Figure 5.2 Analytical model for RETs adoption in Mexico ........................................... 84 Figure 5.3 Hypotheses testing for equation 3 ................................................. ................ 98 Figure 5.4 Hypotheses testing for equation 4 ................................................................. 99 Figure 5.5 Hypotheses testing for equation 5 ............................................................... 100 Figure 5 .6 Hypotheses testing for equation 6 ............................................................... 1 O 1 Figure 5. 7 Hypotheses testing for equation 7 ............................................................... 103 Figure 5.8 Base line results ofstructural model. .......................................................... 105 [12] List of Tables Table 1.1 AMAI Socio-economic segments (AMA!, 2009) ............... .......................... 26 Table 4.1 Demographic pro file of the sample. Author elaboration ................................ 63 Table 5.1 Descriptive measures for beliefs about the consequences of adopting RETs. 66 Table 5.2 Descriptive measures for consumer normative belief .................................... 67 Table 5.3 Descriptive measures for subjective norms of consumer. .............................. 67 Table 5.4 Descriptive measures for consumer's behavioural control. ........................... 68 Table 5.5 Descriptive measures for social network influence ............................ ........... 68 Table 5.6 Descriptive measures for attitudes towards adopting RETs ........................... 69 Table 5. 7 Descriptive measures for behavioural intention to adopt RETs ..................... 70 Table 5.8 Descriptive measures for compatibility ......................................................... 71 Table 5.9 Descriptive measures for complexity ............................................................ 72 Table 5.1 O Descriptive measures for observability ....................................................... 72 Table 5.11 Descriptive measures for triability ......................... ...................................... 73 Table 5.12 Descriptive meas u res for relative advantage ............................................... 74 Table 5.13 Descriptive measures for knowledge ........................................................... 75 Table 5.14 Descriptive measures for consumer's uncertainty ....................................... 75 Table 5.15 Descriptive measures for consumer asymmetric behaviour. ........................ 76 Table 5.16 Reliability measures for beliefs about the consequences if adopting RETs. 86 Table 5.17 Reliability measures for consumer's normative belief. ................................ 87 Table 5.18 Reliability measures for consumer's subjective norm .................................. 87 Table 5.19 Reliability measuresfor consumer's behavioural control. ........................... 88 Table 5.20 Reliability measures for social network influence ...................................... 88 Table 5.21 Reliability measures for attitudes towards adopting RETs .......................... 89 Table 5.22 Reliability measures for behavioural intention to adopt RETs .................... 89 Table 5.23 Reliability measures for compatibility ........................................................ 90 Table 5.24 Reliability measures for complexity ............................................................ 90 Table 5.25 Reliability measures for observability ......................................................... 90 Table 5.26 Reliability measures for triability ................................................................ 91 Table 5.27 Reliability measures for relative advantage ................................................ 91 Table 5.28 Reliability measures for consumer's knowledge ......................................... 92 Table 5.29 Reliability measures for consumer's uncertainty ........................................ 92 Table 5.30 Reliability measures for consumer asymmetric behaviour .......................... 93 Table 5.31 Correlation matrix to assess discriminant validity ...................................... 94 Table 5.32 Cross loadings for the study indicators (part I of 2) .................................... 95 Table 5.33 Cross loadings for the study indicators (part 2 of2) .................................... 96 Table 5.34 Examination of research hypotheses ......................................................... 103 Table 5.35 Summary of structural model assessment and significance ....................... 104 [13] Abstract The growing concern on global environmental problems has provoked a variety of stakeholders' reactions to dernand immediate mitigation measures. Individual and institutional efforts have focused on developing renewable energy technologies (RETs) as water solar boilers, photovoltaic panels, and biomass digesters. Academics and practitioners have studied a number of aspects on RET adoption by investors, government and businesses, but the final adoption decision pe,tains to the consumer. With increasingly higher attention on environmental-related innovations, severa( research approaches have emerged. Firstly, contingency valuation techniques have assessed economic aspects of adoption decision through the analysis of consumer's willingness to pay for RET products. Secondly, the studies tha,: have relied on innovation attributes as proposed rnainly by the diffusion theory are found. Finally, a third category is related to studies that attempt to analyse consumer adoption decision through cognitive frameworks. This dissertation broadly addresses the issues of the third category. Previous research frameworks have explained behavioural intentions in terms of attitudes. The variables in this dissertation's framework also indude three important influencers which are: 1) knowledge, 2) consumer's perceived uncertainty, and 3) consumer asymmetric behaviour. These variables are considered after an extensive review of literature which indicates that they have been under researched in the field of RETs adoption. Consistent with this effort, consumer's attitudes remain at the centre of explanatory variables. Attitudes are also influenced by the perc,!ived innovation attributes and consumer's demographic variables. lmportantly, rncial setting in the fonn of consumer's social network influence consumer's beliefs whid1, in turn, also affect attitudes. In addition, perceived behavioural control has direct i nfluence on behavioural (14] intentions to adopt RETs along with attitudes. Overall, behavioural intentions are the best predictors of actual adoption according to the theories revisited. Partial Least Square (PLS) was the analytical technique used to assess the proposed model, determine interna! consistency, validity, and reliability ofthe items included in the instrument to operationalize the variables. PLS estimates simultaneously dependence relationship among latent variables so it becomes a suitable technique to test the results from the perspective of a set of structural equations. The sample size of this study (n=29 I) in Mexico City was restricted to consumers and complies with the minimum sample suggested in existing literature for PLS analysis. Moreover, PLS was chosen dueto the exploratory nature of this study in which the soft distributional assumption of the technique in contrast with the analysis complexity associated to covariance-based structural models (CB-SEM). Because of paucity of research in the study region, PLS provides the advantage of validating an exploratory model instead of testing a definite conceptual model through CB-SEM. Regarding the measurement model, reliability, convergent, and discriminant validity were analysed. Ali constructs set for the study scored values above the thresholds suggested by the literature, except triability and relative advantage which were kept for the structural model assessment on the basis of moderate validity. In general, there are 14 out of 17 variables with significant statistical support. Specifically, variables for consumer knowledge, consumer uncertainty, social network influence are correlated with beliefs about the consequences of adopting RETs were found significant. Moreover, asymmetric consumer behaviour, consumer behavioural control, beliefs about the consequences of adopting RETs, and innovation attributes are correlated significantly with the attitudes towards RET adoption. Subjectiv~ norms show a high correlation with consumer behavioural control and normative beliefs. The results of [15] statistical analysis of the research model show that attitudes are significantly correlated with behavioural intention to adopt RETs. A number of post-hoc analyses were applied to the measurement and structural model in arder to assess its quality. On one hand, directionality of constructs was assessed using a confirmatory tetrad analysis which showed that constructs used in this study were properly modelled as retlective. On the other hand, effect size, i.e. the measurement of the change in a R2 value when a given exogenous variable is omitted from the structural model effect was analysed for ali constructs and it was found ·:hat normative beliefs have a large intluence on predicting subjective norms. Following this trend, social intluence has a large impact on the prediction of normative beliefs as well as attitudes towards adopting RETs on behavioural intention to adopt thes,~ technologies. Similarly, the beliefs about the consequences predict ata high extent consumer's attitudes towards adopting RETs. Sorne contributions of this dissertation to the RETs' adoption knowledge comprise: 1) the extension of a research framework based on cognitive theo:ies as Theory of Reasoned Action and Theory of Planned Behaviour, 2) the development of a measurement scale and instrument within the urban region in Mexico, 3) the use of PLS as acore data analysis technique, 4) the confirmation of constrnct directionality and measurement of predictive features for the structural model, 5) the demonstration ofthe strong weight that consumer's altitudes have on behavioural intention to buy and, 6) establishes consumer's beliefs about the consequences of using RETs as a critica! influence in altitudes formation. [16) CHAPTER 1. INTRODUCTION 1.1 Overview This chapter introduces the background of the study, motivation to develop this research, presents the purpose of the study, the research objectives and associated research questions. Afterwards, theoretical, practica!, and methodological contributions are identified. Finally, the chapter presents the structure of the dissertation.1.2 Background of the research Energy is the most habitual service of modern times. There is general consensus that higher consumption of energy causes an increase in economic growth in terms of GDP (Lee and Chang, 2008; Shiu and Lam, 2004; Chontanawa et al., 2008; Coers and Sanders, 2012). However, the use of any form of energy must address the particular needs in terms of social, economic, political and environmental aspects. Current economic models focus on energy protection for various reasons such as avoiding oil crises (Soytas and Sari, 2006) or reducing its dependency on the decreasing fossil fuel reserves (Klass, 2003 ). The extensive use of this type of energy involves the usage of natural resources that are be 11011-renewable, i.e. that these resources will last for a finite period of time until they are exhausted. In contrast, renewable energy is derived from natural processes that are naturally and constantly replenished (Koroneos, Spachos, and Moussiopoulos, 2003). Renewable sources have the advantage of being friendly to the environment since they emit few pollutants to the atmosphere. As the service economy expands ali around the world, global energy trends show that renewable energy has been increasingly adopted (REN21, 2011) despite the strong reliance that economies still have on fossil fuels. The diffusion and adoption oftechnological innovations in renewable energy play a critica! role since only with the use of such technological innovations society would [17) achieve a green economy paradigm. The diffusion process of innovations in renewable energy is suggested to be influenced in similar ways to the general innovations by both endogenous and exogenous mechanisrns (Kernp and Volpi, 2008). Besides, there is a variety of factors that affect the innovation process of such te,;hnologies in both dernand and supply sides as geographical and technological distances along dernand-pull effects, and technological opportunity (Verdolini and Galeotti, 2011 ). It has been suggested that one critica! variable is price and thus, externa! support for the adopter (e. g. subsidies). Price variable has been included in percolation rnodels to preclict the adoption levels when subsidies and neighbouring adopters are rnodified (Cantono and Silverberg, 2009). The diffusion rate increases upon a range of subsidy and disappears when the subsidy is out of the effective range. Another critica! factor that influences the diffusion of technological innovations in renewable energy is policy. Particularly, climate and innovation policies rnay hinder the efforts of diffusing such te,;hnologies if they are not included into the research framework (Rao and Kishore, 201 O). Because of the detrimental features of fossil fue Is for the environrnent, increasing prices and depletion with time, the main challenge to current energy Jolicy makers and corporate strategists is to develop adequate and profitable energy services that allow the transition to a green economy. Green econorny is "one that results in improved human well-being and social equity, while significantly reducing environrnental risks and ecological scarcities'' (UNEP, 201 1 ). Green econorny also incorporates low-carbon growth, and innovation. lt is argued that a strategy to develop a low-carbon economy is to cultivate low-carbon economy consciousness by training up low-carbon consuming habits and life style (Xin, Yuding, and Jianzhong, 201 O). Moreover, recent CO2 emissions growth has been led by the ernerging economies in spite of the recent crises (Peters et al., 2011 ). In particular, the latest global financia( cri:;is was considered as a [18) lost opportunity since the emissions trend could not change its current trajectory. Similarly, the 2ºC threshold was proposed in the late 1990s to focus the efforts on avoiding dangerous anthropogenic climate impacts. Given the unfeasibility ofthis limit, the likelihood of an increase between 3ºC and 4ºC was set. The consequences of such temperature raise involve a high number of countries and stakeholders that may use ali available mechanisms to minimize the probability of high temperature climate change. Particularly, Non-nation-state actors (NNSAs)- regional, city, and local government, prívate sector, 11011-for-profit organization and individuals - are proposed to engage in limiting emissions. Agenda for research includes understanding the ways in which NNSAs may contribute to mitigate emissions and adapt to a warmer world and how they can promote them in both, international and domestic stages (New et al., 2011 ). In order to make a transit from the current economic paradigm to a green economy, the adoption and diffusion of renewable energy technological innovations becomes a critica! concern that needs prompt clarification. Adoption and diffusion are entangled concepts that have to be explained. According to Rogers ( 1962), adoption is a concept that involves the analysis and explanation of the factors intluencing the purchase of innovations. While diffusion is the process by which an innova:ion is communicated over time through certain channels to reach the members of a social system. The case of renewable energy innovations involves a multi-dimensional perspective that has been disregarded in the literature. Socio-political, community, and market acceptance are included in a basic model to depict the complexities and challenges that faces the diffusion and adoption of the environmental innovations (Wüsk:nhagen, Wolsink, and Bürer, 2007). Figure 1.1 Social acceptance of renewable energy innovation. Adapted from Wüstenhagen, Wolsink, & Bürer (2007) [19] Socio-political acceptance • Of technologies and policies • By the public • By key stakeholders • By palie makers Renewable energy innovation Community acceptance Market acceptance • Procedural justice • Distributional justice • Trust • Consumers • lnvestors • lntra-firm Figure 1.1 depicts how the market acceptance relates to the participation of both consumers and producers. In the market acceptance apex, con:,Lllners may 'switch' from their current sources of power to another one. This choice includes the offer of alternate sources (e.g. solar, wind, and biomass power) which are techn::>logically feasible at the micro-leve), that is, its usage by households. While market acceptance involve users and producers of renewable energy, community and socio-política apexes comprise the participation of more stakeholders as government, NGOs, and the impacted local stakeholders. 1.3 Currcnt context for the research Current global economy relies heavily on fossil fuels. In 2009, oil represented 32.5 of primary energy production while coal shared of28.1 per cent in the mix. In third place, natural gas contributed with 20.6 per cent of energy production. Renewable sources represented a share of 13.2 per and finally nuclear power partic:ipated with 5.7 per cent ofproduction (JEA, 2011). Similarly, Mexico also relies on fmsil fuels. In 2010, oil and its condensates represented 66.0 per cent of primary energy production while natural [20) gas contributed with 24.3 per cent of energy production. In contrast with global trend, renewable sources represented a share of 6.9 per cent. Finally, coal contributed marginally to energy production with 2.2 per cent and nuclear power participated with O. 7 per cent (SEN ER, 2011, p. 25). Relative to the primary energy production by renewable sources, it is possible to identify specific contributions by source. Traditional biomass, which includes wood pellets and sugar cane bagasse, participated with 54.5 per cent. Matures technologies as hydropower contributed with 20. 7 per and geothermal supplied 23.4 per cent. Finally, more innovative technologies as wind power accounted with 0.15 per cent while solar powerrepresented O. 7 per cent. The consumption of energy by sector show that transport sector uses up 48 per cent while industrial sector consumes 29 per cent. Residential, commercial and public con:;umption reaches 20 per cent and agricultura! uses 3 per cent (SENER, 2011, p. 36). During the period 2002-2008, energy use in residential sector increased 1.4 average per cent yearly (SENER, 201 1 ). Energy consumption in Mexican urban households is based mainly on the use of electricity and gas. Such consumption is a'so influenced by the income decile in which the household is located i.e. the higher the income decile, the higher the energy consumption leve!. Energy consumption also depends on the number of persons living in the household and its physical size (Sanchez Peña, 2012). In contrast with other countries, there is a lack of specific micro-data about final use of energy by appliance and energy source in households in Mexico. However, estimates show that households allocate 47.0 per cent of their energy consumption to water boiling, followed by 27.5 per cent to food preparation, and 9.9 per cent to refrigeration. Lighting consumes 6.7 per cent while remaining applications consumes 8.9 per cent (SENER, 2011 ). [21] Technologies in renewable energy are thought to fulfil the social, economic and climate needs of societies. lnnovations in renewable energy replenish from the natural sources of energy available in different geographic locations. The global trend of renewable energy consumption which has been raising in the last 25 years along with the higher investment levels allocated to these technologies have generated a high growth rate in installed capacity. In the last I O years, the investments focuseci on technologies associated to renewable energies in developing countries have shown prominent growth rates. Specifically, solar and wind technologies have received attention dueto its decreasing unitary cost and easiness to deploy (UNEP, 2011 ). 1.4 Motivation for the research Green energies are natural energy inputs that do not deplete wii:hin time, and they foster decentralization and tlexibility of technical solutions. Green en~rgies are suggested to be a feasible way to make the transition towards a green econorny (Midilli, Dincer, and Ay, 2006). Green economy also incorporates low-carbon growth, and innovation of renewable energy technologies (Xin, Yuding, and Jianzhong, 201 O). However, it is not sure that economic orthodoxy is able to face the complexities of climate challenge leads to reframe the economic growth along with a simultaneous decarbonisation (Anderson and Bows, 2008). Such perspect ives cal! for the adoption of a type of energy that may alter the current fossil-fuels-base of the energy paradigm. Achieving insights into consumer adoption processes is critica! to develop an alternate modelling that may foster the adoption of technological innovations in renewable energy by urban households in Mexico. As household are among the three main consumer segments, the modelling of the diffusion and adoption patterns is worth for a number of reasons. Firstly, the commercialization of technological innovations requires insights on the consumer preferences. Thus, if they are not considered within thc innovation process, (22] the risk of a mismatch may increase and the profitability ofthe tirm may be harmed. Secondly, energy policy makers need to formulate sound policies so they can reach the overall objectives in terms of clean energy quotas, for example. With an alternate modelling, they can have knowledge of the factors that influen,:e the adoption rate of such technological innovations. Failing to do this, may result in miss international and national targets that decrease the competitive position of the country. Final ly, understanding the consumer may translate knowledge into primary product development stages which eventually allow higher adoption rates. 1.5 Description of the research problem Alternate sources of energy consumption along with technical innovation of systems will produce slower climate change and would promote the sustainability of mankind. Because green energies take naturally present inputs that do not deplete within time, and they foster decentralization and flexibility of technical solutions, they have been suggested to be a feasible way to make the transition work (Midilli, Dincer, and Ay, 2006). Diffusion and adoption processes for renewable energy t1!chnological innovations need clarification since there is still a gap between the positive attitudes of people towards energy coming from renewable sources and the actual modest rates of service's up-take (Litvine and Wüstenhagen, 2011). Therefore, the understanding ofthe adoption of renewable energy innovations may drive the current economic paradigm based on fossil fuels towards a green economy. 1.6 Research objectives and research questions The general objective of this dissertation is, to analyse the diffusion and adoption processes with focus on technological innovations in renewable cnergy by urban households in Mexico. The specific objectives of this study are as detailed below: [23] 1) To analyse the consumer knowledge and motivations towards the adoption of RET innovations in urban Mexican households. 2) To measure the adoption intention of RET innovations, develop, and validate the relationship between the factors that drive adoption of such products. 3) To suggest and alternative modelling to support marketing strategy and energy policy. Consistent with overall and specific research objectives, this dssertation proposes the following research questions: Research Question 1 (RQ 1 ): What is the impact of a renewable energy policy on the adoption of renewable energy technologies among Mexican urban households? Research Question 2 (RQ2): To what extent, the rational decision making process is maintained in reference to the adoption of renewable energy technologies among Mexican urban households? Research Question 3 (RQ3): What is the role of information, knowledge, perceptions, and intentions towards actual behaviours related to the adoption of renewable energy technological innovations among Mexican urban households? Research Question 4 (RQ4): What is the intluence of social norms, habits, groups of reference, consumer network, and self-efficacy on the adoption of renewable energy technological innovations among Mexican urban households? Research Question 5 (RQ5): What is the multivariate dynamics among RQ3 and RQ4? Research Question 6 (RQ6): To what extent the attributes of renewable energy technological innovations determine its adoption among Mexican households? [24] Research Question 7 (RQ7): Which attributes of renewable energy innovation serve as decision drivers and which attributes emerge as barriers to adc,ption? 1.7 Suggested methodology To address the research questions, a moderate-sized quantitative study was implemented. Data was acquired using a purposive sampling of households in Mexico City and the consumer's responses were collected using both cnline and printed questionnaires. This dissertation investigated only one RET product which was the solar water boiler. Data collection generated 291 complete questionnaires. Such questionnaires included questions representing each construct of interest as well as sorne basic demographic features. The analytical methodology implemented in this dissertation involves structural relationships. Partial Least Squares (PLS) path technique was chosen given the complexity of the proposed research model, unknown data distribution patterns, and lack of enough literature to suggest an alternate method, hence, an exploratory approach was conducted. PLS has been substantiated in previous literature as a technique to predict relations among variablesof interest under the assumption of hypothesised linear relationships. Post hoc analysis as confirmatory tetrad analysis, effect size, predictive relevance, effect size, and consumer heterogeneity far predictive relevance were performed to assess the quality of the tested model. 1.8 Definitions and terminology There is a wide range of definitions in the energy sector and the field of innovation, thus, this section defines the following working terms that will be adopted in the overall manuscript of lh is dissertation. [25] Fossilfuels: This term refers to the fuels that were formed in previous geological eras inside the earth. They contain high levels of carbon and include coal, petroleum, and natural gas (World Bank, 2013 ). Renewable Energy Technologies (RET): This term regards the technological options that convert natural inputs as water, wind, sun, and biomass into different type of energy wh ich can be u sed to fu lfil the energy needs of household, tra 1sport, and industry (REN2 l, 201 1 ). Definitions about sustainable energy, clean energy, and green energy and technologies also exist in literature, and will be used indistinctly in this dissertation. Technological innova/ion: A commercially viable product tha·: involves novel and evident technological features (Johnstone et al., 201 O). Soc:io-economic classificalion: This dissertation adopts the soc:io-economic classification of consumers as defined by Mexican Association of Market lntelligence and Opinion Agencies (AMAI). The categories are indicated in the Table 1.1 below: Table 1.1 AMAI Socio-economic segments (AMAI, 2009) Category AB e+ e D+ D,E Monthly Family Income Over $35,000.00 pesos From $11,600.00 to $ 35,000.00 pesos From $6800.00 to $11,599.00 pesos From $2,700.00 to $6,799.00 pesos Less than $2,699.00 pesos Adoption: Several tenns are used to depict the influences that c:msumers receive regarding the purchase likeliness of technological innovations. Some authors rely on the term ·acceptance' oftechnological innovations (Wüstenhagen et al., 2007; Zografakis et [26] al., 201 O), the majority (Caird and Herring, 2008; Castaño et al., 2008; Claudy et al., 2010; Faiers et al., 2007; Gerpott and Mahmudova, 2010; Grieve et al., 2012; Mani and Oh ingra, 2012; W orsdorfer and Kaus, 201 O) use the term ·adoption' to depict consumer attitudes, intentions and behaviours in reference to the purchase decision of such innovations. There appears to be no substantial difference in both terms. However, this dissertation will prefer the term ·adoption' to maintain consistency with previous research. 1.9 Contrñbution of the research This dissertation aims to fill the gap between the diffusion of renewable energy innovations and its adoption by households. The theoretical coritribution of this dissertation is to propose an integrative framework based on relevant theories to explain household adoption. In doing so, Mexican urban households are be the basis upon which this framework is tested. Moreover, this dissertation atternpts to extend the knowledge on adoption of renewable energy technological innovations since there is paucity of research in the field in Mexico and Latín America. H~nce, this research study would significantly contribute to the existing literature. The main contribution of this dissertation is that it explores the relationship between cognitive variables, innovation attributes and consumer's intentional behaviour to adopt RETs. This research is exploratory in that it extends previously developed cognitive frameworks by including contextual variables and innovation attributes. In general, the analysis reveals that consumer's attitudes towards adopting RETs does have a strong positive impact on the behavioural intention to adopt this type of technology. In turn, belief about the consequences of adopting RETs is found to determine ata high extent the consumer's attitudes. (27] Further, this dissertation investigates the role of innovation attributes and their relationships with consumer's altitudes. Compatibility, complexity, and observability have a small but significant influence on consumer's attitudes 1owards adopting RETs while triability and relative advantage are poor predictors of such attitudes. Although these influences are minor and the effect sizes are small, this still offers interesting avenues for future researchers. Ali constructs are best represemed as reflective ones as was confirmed within this dissertation. Regarding the methodological contributions, much of the existent literature has relied on the use of contingent valuation and con_joint analysis to evaluate the consumers' preferences and adoption intentions, and this study implements a partial least squares (PLS) path modelling technique for the analysis of the relationships between the constructs. An analytical rnodel in the forrn of a set of linear equations is developed. The testing ofthe rneasurernent and structural models follow a number of procedures to validate the results. A confirmatory vanishing Tetrad analysis a long with size and interaction effects which is a novel application within the renewable energy field. The findings highlight the need for researchers to include cogn'tive variables and innovation attributes in future validation studies. This dissertation contributes to the understanding ofRETs' adoption within the overall discipline ofmarketing. There are rnany implications derived from the findings and the manageri¡:_I utility is showed through a number of guidelines in Chapter 6. 1.10 Limitations The scope of this dissertation focuses on the measurement and validation of a number of interrelated cognitive variables and innovation attributes within the Mexican urban household context. This study extends previous cognitive frameworks to include contextual variable in the approach of the adoption decision. The initial assumption is [28) that people in developed countries tend to praise renewable energy at premium prices and show convergent positive attitudes towards such technologies. Hence, based on the existing literature, a qualitative research stage was not considered. RETs have evolved there is a number of products available. While it is desirable to take a stakeholders perspective, it was decided to take into consideration only the best known RET product in order to evaluate the research framework, i.e., water solar boilers. Therefore, it may not be feasible to extend the conclu:;ions beyond other products. Selected variables were included in this dissertation and, consequently, a full arra y of antecedents and outcomes of consumer's attitudes and behavioural intentions were not modelled given the impracticality. In contrast, this study focuses on relevant cognitive and innovation attributes to ease the empirical analy.,is, that is, to analyse a subset of the relationships reported in the literature. 1.11 Structure of the Dissertation The dissertation is divided into even chapters. Besides Chapter 1 on lntroduction, Chapter 2 reviews relevant literature on adoption and diffusion processes taking renewable energy technological innovations as core argument. Drawing upon existing literature, Chapter 3 discuses theories that converge in buying adoption processes. In addition, it develops a theoretical framework that includes the relevant aspects of theories in orcler to explain the diffusion and adoption processes by urban Mexican households. In order to validate the proposed framework a set of hypotheses is proposed. Chapter 4 explains the study design aspects of the research. This chapter covers choice of sampling technique, measurement instrument, data collection plan, measures of construct, and ambiguities and unexpected results. Chapter 5 discusses the tindings from the statistical data analysis. Specifically,a discus,ion on validation of each of the hypotheses is offered along with some primary and alternative explanations [29] for the variables behaviour. A general discussion on how the testing of hypotheses validates the proposed framework is included. Statistical description of the data, correlation matrices, and results for Structural Equation Modelling data analysis technique are reviewed. Chapter 6 details the managerial and policy implications ranging from facilitating processes in reference to adoption of renewable energy technological innovations, to prospective scenarios. Chapter 7 offers sorne concluding remarks to the dissertation. Limitations and further research lin-;:s are also be included. Bibliographic references to ali cited documents are declared. Final appendices includes the relevant statistical tables anda transcript of the instrument used for data collection. [30] CHAPTER 2. LITERA TURE REVIEW 2.1 Overview Drawing on the overall and specific objectives of this study a long with the research questions proposed beforehand, this chapter covers the theoretical framework on consumer adoption of technological innovations in renewable energy. To accomplish this objective, this chapter firstly reviews relevant theories and models that can be used to explain consumers' adoption. Afterwards, existing research is critically reviewed to detect apparent research gaps and relevant intluencing variables to the adoption of innovations. This chapter concludes by proposing a research model that includes the concepts of knowledge, uncertainty, and consumer asymmetri: behaviour as main contribution of the literature review in understanding consumers' adoption of teclmological innovations in renewable energy. 2.2 Theories and models on RET diffusion and adoption 2.2.1 Theory of choice The standard micro-economic theory that formally models economic preferences starts by supposing that individuals seek to maximize their satisfaction from the economic choices that they make. In economic terms, such satisfaction refers to a utility function which is derived from the individual's ability to state her preferences clearly, completely a long with maximizing the outcomes of the decision (Aleskerov et al., 2007). Such assertion implies that the individuals have comple,e information about their options and its consequences and that the available options are practically infinite (Edwards, 1954 ). Following these salient assumptions, a ratioml-oriented individual is required to behave according to the theory·s assumptions. The :ritical point lies then on choosing the best option to the individual. [31] The rational choice theory faces at least two initial problems. One of them is the available income to the individual and the other one relates to the fact that such preferences are stated 'a priori'. Microeconomic theory solve5 the first issue by matching the income that allows the individual to afford a certain bundle of consumptio11 with the preferences that maximizes the utility cerived from consuming a given bundle. The second issue is expanded to include a new classification of preferences based mainly in the observable purchasing behaviour of people, that is, revealed preferences (Beshears et al., 2008). Figure 2.1 show that in reaching the maximum point ofthe utility function, the individuals are assumed to choose according to their maximizing effort. The preference is revealed when, given two bundles equally affordable, the consumer chooses one of them. Figure 2.1 Utility functions ofindividuals. Adapted from Edwards (1954). Consumplion of good Y ~-----v--+----"--~~------- C o r Is u m p l ion or 1 2 good X The choice theory is based on individual responses toan economic scenario and the aggregated data can be achieved by simple aggregation of individual preferences. However, other perspectives to analyse the collective behaviour of individuals and groups have been suggested. Collective action is based on the supposition that a group of individuals pursuing a common goal would act consistently in order to achieve such goals. Because a group can perform activities in view of a common goal and so, its [32) main function becomes to advance the common interests of the group (Olson, 1968). lt is argued that besides economic incentives of the rational orirnted thinking, social and psychological factors as a desire to gain status or power, and :,ocia! pressure may generate individual contributions to the group's outcomes. The assumption that groups act based on their objective circumstances is complemented ty subjective factors, as perceived injustice. perceived efficacy, anda sense of social identity impact the collection behaviour (van Zomeren et al., 2008). An implication of this perspective mentioned in the Stern Review (HM Treasury, 2006) is that an effective international response to climate change is based on creating the condition:; for an immediate international collective action. 2.2.2 Stated preferences An increasing body of research has attempted to assess the reasons behind the differences between consumption preferences. These studies aim to inform poi icy making about the current preference status of passive value use which comprises any change in the quality of environment without a necessary obs1!rvable behaviour (Adamowicz et al., 1998). Specifically, contingent valuation (CV) and choice experiment (CE) have become popular methods to determine the value of multiple environmental dimensions. While CV method proposed abas,:! case andan alternative, CE presents multiple alternatives into the study design in ordt:r to generate a suitable response to estimate the consumers' preferences over the attributes of a state. In other words, while CV allows the inclusion of only one attribute in the base scenario, CE allows the use of a multi-attribute response of a scenario. Similarly, conjoint analysis (CA) methocl assesses consumers' preferences responses from hypothetical products by assigning individual regression coefficient to each ofthe product's attributes (Green and Srinivasan, 1990). For example, Borchers et al. (2007) used CA to analyse willingness [33] to pay for green energy by specific renewable source while Aguilar (2009) studies wood-based energy initiatives. While CE, CA, and CV may provide a measure of the utility Lnd preference overa range of choices, some limitations are to be addressed. First, the number of attributes impact the experiment, that is, the lack of relevant attributes may lead to paradoxical results dueto contextual influences as political and economic instability. In addition, unobservable behaviours as group reference, language, and so;;ial ties alter the experiment's outcomes (Lüthi and Wüstenhagen, 2012). Second, the empirical results show moderate adoption rates of green energy; however, the n!al link to a green economy paradigm is based on the actual adoption of technologies. Therefore, the need to assess the ··walk the talk" (Litvine and Wüstenhagen, 2011) types of behaviour, that is, the analysis of revealed preferences should be included to gain understanding about the factors that make consumer's behaviour consistent with their preferences. 2.2.3 Theory of reasoned action Models that explain the diffusion of innovations appeal to rational choice making in which consumers weights costs and benefits ofadopting a given innovation but disregard the perceptive, attitudinal, and motivational reason to decide in one way or in another. The theory of reasoned action takes attitudes as acore concept in attempting to predict the behavioural intentions of people as showed in Figure 2.2 (Fishbein and A_jzen, 1975). Attitudes are learned predispositions to respond consistently in a bipolar range regarding the object utilised as affective and evaluative polarfeelings towards some object. Fishbein and Ajzen ( 1975) differentiate between attitudes and beliefs which refer to the cognitive evaluation of the information that the person have about the object. Both attitudes and beliefs interact in a feedback loop to then influence a number of potential behaviours that the person may execute. According to this theory, the [34] intentions are related to a general pattern of observable behaviours in reference to the object. Since attitudes are considered as general predispositions that lead to a set of intentions instead of performing a specific behaviour, they indicate the particular affect towards the object. Because each intention is related to a specific behaviour, the observed actions of the person will correspond to her attitudes to that same object. These attitudes have a strong weight in determining the intentions to perform the particular behaviour. Figure 2.2 Framework to predict specific intentions and behaviours. Adapted from Fishbein and Ajzen (1975). r------------------- 1 + Belief about Atfitude 1 consequences towards - 1 of behaviour X behaviour X lntenüon to f----+ perform Behaviour X behaviour X Normative Su bJeclive norm 1 beliefs about concern,ig ~ behaviour X behaviour X 1 t 1 i_ __________________ __J -------+ lnfluence - - • Feedback The intentions to behave in a particular fashion are also influenced by the social referents that indicate whether the person should behave in one way or in another. Motivational factors can make the person follow or disregard such referent and this leads to the rising of subjective norms, a term coined to describe the normative pressures acting on the beliefs and behaviours of the person. A salient feature of the theory of reasoned action is that the person 's exposure to new .nformation detonates a change in beliefs which lead to changes in attitudes. Changes i:npacting the right beliefs and attitudes would produce changes in the related intentions and their related behaviours. [35] 2.2.4 Theory of planned behaviour A misalignment between intentions and actual behaviours was not successfully explained by the theory of reasoned action, that is, a person showing strong intentions to behave in a certain way showed a behaviour that was not adequately described only by beliefs, attitudes, and intentions. Such gap presented in Figure 2.3 appeared to be due on one hand to the person's incomplete volitional control and on the other hand by non- motivational factors as time, money, or skills. Figure 2.3 Theory of planned behaviour. Adapted from Ajzen (1991). AILilude loward lhe behaviour Perceived behavioural conlrol Behaviour Drawing u pon the self-efficacy theory, Bandura ( 1977) included the concept of perceived behavioural control in order to explain the extent to which a specific behaviour is easy or difficult to perform according to the person's perception. Under this view, the more influenced the person is on his ability to perform a given behaviour, the more likely he will succeed in performing such behaviour. 2.2.5 Diffusion theory In his seminal book, Rogers ( 1962) posed a theory that seeks to explain the underlying mechanisms for the communication of an innovation to the rrembers of a social system. In doing so, he categorised adopters according to the specific time when they "adopted" the innovation relative to its launch. Such normally distributed categories range from the most innovative to the less innovative as the diffusion spreads on time (see Figure 2.4). First, innovators (2.5% of adopters) are venturesome people who are eager to take [36] risks and ability to cope with the uncertainties that an innovation brings. Second, early adopters ( 13 .5% of adopters) are successful and respected peo ple that be long and serve as role models of a local social system. Third, early majority (34% of adopters) include deliberative people who frequently interact with peers befare adopting an innovation. Fourth, late rnajority (34% of adopters) sceptical and cautions people whose peers exert pressure u pon them and are in economic need. Final ly, laggards ( 16% of adopters) comprise isolated and suspicious of innovation people who have their points of reference in the past and whose econom ic resources are restricted. Figure 2.4 Adopter categories vs. life cycle of innovations. Adapted from Rogers (1962). 08 Lifecycle 06 of innovatio11 0, Ol Titroduction ,;.... _ _¡, ___ _ -15 -IS Adop1ers Decline ~-5 os 1.5 Adopters engage in a five-stage decision making process to whether adopt or reject an innovation: 1) Knowledge. The individual is exposed to information about the presence of an innovation and its functioning. Factors as socioeconomic characteristics, personal variables, and communication behaviour affect the individual in this stage. [37) 2) Persuasion. The individual forms a favourable or unfavourable opinion about the innovation according to five dominant attributes; relative advantage, compatibility, complexity, triability, and observability. 3) Decision. The individual executes activities to adopt of reject the innovation. 4) lmplementation. The individual puts into action the innovation. 5) Confinnation. The individual seeks information that confirms reinforcement of the decision. lf conflicting information is received, the individual may reject the innovation. One of the first empirical attempts to test the diffusion model (Bass, 1969) focused on technological durable consumer products as refrigerators, air conditioners, and televisions. Based on the main assumption about the number of previous buyers as linearly related to the probability of purchase, the model was found consistent with the data from durable goods. This argument is derived from the behavioural desire of consumers whether to innovate orto imitate in their buying intentions. While innovators act independently from the opinion or decisions of other individ uals, im itators are influenced by the pressures of the social system where they are embedded. This pressure increases for late adopters dueto the higher number of previous adopters. One ofthe features ofthe model is to pose a coefficient of innovation, p, anda coefficient of imitation, q to measure the speed of diffusion and adoption. An additional feature ofthe model is to allow the better forecasting, particularly for long range planning. A more general ised form of Bass model (GBM) goes further and incorporates the marketing mix variables as price and advertising (Bass et al., 1994) as part of the marketing efforts that reflects the effect of dynamic marketing variables on the conditional probability of adoption. It was found that GBM outperforms the previous [38) model in predicting changes in price and advertising policies that further foster the adoption of new products. Theoretical diffusions model have properly resembled the actual dynamic behaviour of consumer durable innovations and the potential of generalizaticm seems to be high according to the selected innovation drivers. However, some unsolved problems have been highlighted to reach a robust integrative perspective of the diffusion theory. First, the measurement of data available prior toan innovation launch has been disregarded by literature. Besides, competing measures of purchase as depend,!nt variable have been used and no clear patterns can be differentiated among first purchases and re-purchases. Second, innovation factors have been studies separately and an effort of integrating them is still pending. Third, diffusion models have relied on su:::cessful products across countries, thus, a need for studying innovation failure and the adoption levels inside countries would provide a stronger case for the generalization of diffusion models (Chandrasekaran andTell is, 2007). Finally, a further research I ine for these models would include the life cycle of the products, particularly at the critica( stages of the take- off and technological substitution (Peres et a., 201 O). Because the acloption of renewable energy innovations relates t,J a variety of representatives as industry, community, and government, Mallet (2007) argues that the Roger·s diffusion rnodel needs to be revised to include the features of technology cooperation as a part of technology adoption. The underlying reason is that the active participation of representatives is an active process in contrast to the passive view of Roger's model. Similarly, Bailis et al. (2009) have followed up the success and failure of commercializing cook stoves by social entrepreneurs in rural Mexico. Departing from a donor-based rnodel, they found that mixed efforts of social mi:lrketing, i.e. market- (39] based diffusion schemes along with donors' participation and government incentives show the contextual interplay of the participants. 2.2.6 Social network theory While the interactions arising in small groups had received attention to certain extent, a perspective based on the social network was proposed to enable a link between the micro scale (e.g. individuals and small groups) and the macrc scale of the social structure (e.g. 111arkets). The underlying assumption is to con!;ider that individuals make decisions based on the trustable information they share in their social networks. While the preferences of doing so111ething are valued by the choice lheory, what the social network theory values 111ost is inquire with who111 the transacc:ional interchange happens. The strong personal ties that individuals initiate features a low level of infor111ative exchange while weak ties include a high volume of information interchange which makes these ties 111ore valuable in analysing the intluence that inforrnation has on group organization and co111munication patterns (Granovetter, 1973 ). Another salient feature is the network density in which the denser the network, the more persistent a norrn or idea is found in the network. Moreover, an individual possessing tiesto various separated networks may benefit from the information corning from them since this individual is the only path through which inforrnation tlows form one network to another forming then a structural hole. Finally, the interplay among the economic with the non-economic nature ofthe institutions raises the problem of social 'embeddedness', which attempts to capture the impact that non-economic institutions, its goals and processes have on the techniques and costs implied into the economic activity. The analytical foundation of the theory lies on the fact that strong, weak, and absent ties may occur. These ties configure the unique bridges through which information tlows among participants. As showed in Figure 2.5, such links can go from one participant to sorne others. Figure 2.6 [40] presents a more complex network which includes severa! actc,rs and links. As these bridges emerge, they connect the participants of a number of networks. Hence, they play a critica! role in studying diffusion patterns among the social structure. Figure 2.5 Basic nodes in a social network. Adapted from Granovetter (1973). Figure 2.6 Complex network structures. Adapted from Granovetter (1973). e a Strong tie - - - - Weaktie d g Subsequently, a review of pioneer empirical studies (Granovetter, 1983) suggests that the use of social network theory may provide insights to the diffusion of ideas and innovations since the weak tics makes information and innovations available to different social contexts. Furthermore, the case for the networked innovation includes the problem of social embeddedness by suggesting sorne examplcs of how sorne breaking innovations achieved successful levels (Granovetter, 2005). 2.3 Convergence of theories and models on consumer adoption decision Sorne theories involve severa! aspects of individual and social aggregated behaviours that take place in a variety of conditions. Particularly, the previous theories are discussed because they converge in the adoption decision pro;;esses ranging frorn [41] simple decisions, to perceived personal features, to purchasing and major decisions. Thus, they contribute to gain valuable insights in the adoption decisions and diffusion of technological innovations in renewable energy. Rational choice theory (Edwards, 1954) is instrumental in being a departing point in analysing the adoption decisions since it provides a founding a normative framework to assess the economic value of individual decisions. Stated prefi!rences (Adamowicz et al., 1998) illlply knowing the passive decisions of individuals leading to different consumptions profiles, though they lack showing the actual dt:cisions made by the consumers. Theory of reasoned action (Fishbein and Aj zen, 1975) goes deeper in describing the behavioural process of individuals by including in the analysis the personal bel iefs, anitudes, intentions that lead to a consistent behaviour in the decision Illaking process. However, this theory had been limited in explaining why a consumer with a certain anitude fails to behave accordingly. Theory ofplanned behaviour (Bandura, 1977) refines the previous theory by including the perceived behavioural control to further explain the reasons by which a consumer is ·:o behave according to their psychological profile. Diffusion theory (Rogers, 1962) complements the individual frallleworks lo offer an aggregate view of the successive stages that a consumer passes through during the adoption process. A typology of adopters i:, then developed to understand the specific characteristics of consumers according to the time dimension. Bass Illodel (Bass, 1969) and generalized Bass model (Bass et al., 1994) includes marketing variables in order to bener understand the effect that their effect on the probability of adoption. Finally, social network theory (Granovener, 1973) colllplements the previous perspectives by assessing the socia ties of the consumers. Particularly, weak ties make share heterogeneous information that leads to changes in [42] the purchasing decision process. This convergence perspective is presented in Figure 2.7. Figure 2.7 Convergence oftheories in innovation adoption decision. Author elaboration. Eonal choice lheory 2.4 Concluding comments In this chapter, relevant theories and frameworks have been discussed anda convergent of such research perspectives on the consurner's adoption decision has been substantiated. lt was established that adoption is a multidimensional decision involving cognitive variables showed by the consumers, environmental 1ntluences coming from the immediate social network, and innovation attributes. This chapter posits that there is a need for research into the effects of multiple variables on the consumer choice. The next chapter discusses relevant variables as derived from the theoretical perspectives discussed in the previous sections and develops set of hypotheses for a structural model. [43] CHAPTER 3. DETERMINATION OF RELATIONS BETWEEN CONSTRUCTS 3.1 Factors intluencing RET adoption In terms of variables, a comprehensible review of literature shows that the salient features include bel iefs about consequences of executing a behaviour, belief norms, altitudes, subjective norms, perceived behavioural control, demographic variables, social ambiance, and innovation attributes. Furthermore, existing literature shows three research gaps that have not been included in previous integrat:ve frameworks for renewable energy innovations. Such gaps are presented in Figure 2 and discussed below. AII relevant variables are also discussed. 3.1.1 Consumer knowledge This factor
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