The barriers of transforming biofuel inventions into business successes | Gordon S. Lang School of Business and Economics

The barriers of transforming biofuel inventions into business successes

Posted on Thursday, January 5th, 2017

Climate change policy is an increasingly popular and polarizing topic in Canada and around the world, one that has seemingly poised the biofuels industry for rapid development based on the demand for alternative energy sources. While we often hear about new and improving technologies that are intended to help build a more sustainable Canada, translating these scientific successes into business successes is challenging and many fail to make it to market.

Research from accounting professor Fred Pries investigates why so many biofuel technologies are not being put to use, and the answer has nothing to do with a lack of options or potential. Through an analysis of 652 risk factors from 26 publicly traded biofuel companies, Pries and his co-authors found that the major barriers blocking these discoveries are management, management processes, market conditions and profitability. Furthermore, to bring new biofuels to market, there needs to be a strategic balance between investing in research and investing in commercialization.

“Right now, lots of money goes into research on new biofuels, but little effort is invested into taking those things that are discovered and putting them to use,” said Pries. “Our goal in this research was to look at this issue from a company perspective and identify barriers in commercializing these technologies. If we identify the barriers, we can help companies overcome them.”

Within the management sphere, the industry lacks personnel with specific skills who can take scientific inventions and translate them into products that are attractive to the marketplace. Furthermore, enhanced management processes, including enterprise risk management, financing, corporate structure and partnerships, are needed to move new biofuels forward. Pries also highlights that market conditions need to be more favourable, giving specific mention to regulation, which directly affects subsidies and product demand.

“In current market conditions, there’s a lot of discussion among companies about risks and change in policy,” Pries said. “Companies are making long-term decisions, but government decisions are short term. It is difficult to invest in a biofuel plant when the rules are always changing, so we need to better understand these risk factors so the industry can be better supported for years to come.”

For policy makers focused on achieving climate change objectives, this study provides evidence of weaknesses in the biofuels industry at a time when there is increased attention being paid to reducing the need for fossil fuels. With improved policy, new technologies could gain stronger leadership and a better environment in which to proceed to market. According to Pries, it is research that is helping to solve a real problem that is holding back sustainable innovations.

“Conducting this study was an opportunity to use my knowledge to help deal with a problem that is important,” said Pries. “Too many of these technologies never realize their full potential because they never make it out into the world.”

Fred Pries is an associate professor of accounting in the Department of Management. Read more on his research and teaching on his faculty profile.

Read more on this research in Energy Policy, “Risks affecting the biofuels industry: A US and Canadian company perspective.” 

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