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This paper describes a systematic literature review of how market-based instruments can influence the development of sustainable innovation. Our analysis of empirical papers published in selected peer-reviewed journals from 1992 to 2021 shows that contextual factors such as geography and industrial sector impact whether market-based instruments successfully stimulate firms to adopt sustainable innovation. Interestingly, while most of our selected papers on East Asia report positive effects of market-based instruments, about half of the papers on Europe report negative or non-significant effects. Moreover, we appear to uncover a link between the research method they use for analysis and the observed effectiveness of market-based instruments. We reflect on the limitations and bias in current methodological approaches and discuss explanations for our findings, implications for policymakers, and avenues for future research. • We review the effect of market-based instruments on sustainable innovation. • Results from 76 empirical papers show mixed effects. • The observed effect appears to depend on geography and the research method applied. • Instruments appear more effective in East Asia than in Europe. • Reported effectiveness is higher in studies using patent data versus surveys. [ABSTRACT FROM AUTHOR]

The absence of a dominant design can impede the diffusion of environmental technologies. A certain degree of standardization is necessary so that firms are able to focus on process innovations that make the technology accessible to the masses. In this context, this paper studies how technological centrality and home bias in the innovation process influence the emergence of dominant designs in the mobility sector. An analysis of over 5000 electric-vehicle innovations shows that technological centrality hinders a dominant design from emerging. However, a bias in favor of innovations from the home continent mitigates this negative effect. Thus, innovations from East Asia do not consider European and U.S. innovations and vice versa. East Asian firms are different from both European and North American firms in how home bias affects the emergence of dominant designs. In East Asia, home bias has more impact on the emergence of dominant designs for central technologies than in other continents, while it has less impact for other technologies. Home bias is hence not only a firm-level mechanism, but also a helpful construct for the study of innovation systems. A lack of international standard cooperation might further influence future managerial and governmental decisions fostering developments towards cleaner technologies. [ABSTRACT FROM AUTHOR]