Association for Public Policy Analysis & Management

In rapidly developing areas, demographic changes bring more of the world’s population to urban environments. Management of the built environment has emerged as a growing priority for communities, developers, advocates, and policymakers. As “civic laboratories” for policy and technological innovation, local planners and policymakers actively experiment with novel practices and technologies to mitigate the built environment’s expanding environmental impact. Policy and technological innovation at the local level is often carried out in the development of highly visible and often well-promoted demonstration (pilot) projects. Where these demonstrations engage and coordinate numerous stakeholders at the local scale, pilot projects stoke ancillary benefits by providing a streamlined setting for learning-by-doing or learning-by-experimenting with alternative policies and technologies in cities. Local demonstrations may impact broader institutions, technology choices, and market practices, catalyzing market transformation by initiating large-scale change.

Despite the widespread use of pilot projects as civic experiments, there is limited empirical evidence of their impact on the development of policy, best practices, and adoption of new technology. Further, the precise channels by which pilot projects impact broader institutions and practices is relatively unknown. Motivated by these gaps, this paper investigates the impact of LEED pilot projects on subsequent market adoption on both a local and national level. We hypothesize LEED pilot projects stimulate local private-sector adoption of the LEED standard through both supply- and demand-side effects. Nationally, we hypothesize that organizations channel learning from LEED pilots, facilitating spillover of best practices and technologies to new locations with no pilot.

To test these hypotheses, we utilize detailed data on all registered and certified LEED spaces in the United States since the program’s inception. We exploit variation in the location, timing, and type of LEED pilot projects, using triple difference-in-differences to identify the impact of pilots on local market practices while for a suite of covariates. Then, we develop a network of LEED building owners based on organizations with certification in multiple locations. We exploit this network to identify how organizational diffusion may magnify impacts of pilots to a national scale, using a modified linear-in-means social interactions model to test for such spillovers.

Results indicate significant local increases in green building interest following a demonstration project. Further, firms certifying in multiple locations accelerate diffusion to locations without a pilot. Taken together, these results demonstrate how the impacts of demonstration projects are magnified through networks, which catalyze both local diffusion and broader market penetration. This phenomenon has implications for our understanding of technology adoption, sustainable development trends, and the impacts of pilot programs. Policymakers may exploit these networks to enhance technology adoption when planning local demonstration projects.