This chapter develops the economics theory of demonstration projects and then investigates the role of one demonstration project – the Kendeda Building for Innovative Sustainable Design – at lowering information barriers for the adoption of innovative energy and environmental technologies. The KBISD demonstration project allows us to observe the formation of a network around a demonstration project and how attitudes and behaviors relating to environmental technologies permeate and disseminate throughout the network. This section presents results from an industry-wide survey as well as several dozen semi-structured interviews related to the KBISD. The interviews reveal motivations, challenges, innovations, costs, and risks associated with participation in a demonstration project, as well as key differences between this living building approach and design–bid–build approaches often employed in traditional buildings.It finds that, while working on the building was not affiliated with increased levels of technology familiarity prior to building construction, being affiliated with the US Green Building Council is highly correlated with increased knowledge of emergent technologies. This points to professional knowledge networks as having a key role in disseminating information regarding emergent technologies.

This chapter develops a theory to explain how demonstration projects can help facilitate transformation in the marketplace. This theory is based primarily on a single economic concept: The costs of acquiring and utilizing new information. Understanding the role that pilot and demonstration projects can play in disseminating information is crucial to understanding the prospects for market transformation. These information flows occur both on the supply side and demand side of the (building) technologies market. This chapter details how information flows across supply networks and throughout markets can eventually shift standard operating practices, though these results are hardly guaranteed. We speculate that geographic networks and communities of practice are largely responsible for leveraging information spillovers, lowering costs, and facilitating dissemination of innovative technologies.

This chapter organizes the review of our perspectives on Green Market Transformation into factors that predict and explain Green Market Transformation.First, we describe the conditions associated with this transformation.These are factors that supports the transformation occurring. To transform markets through voluntary mechanisms requires the strong rule of law, institutions to curtail fraud and to support property rights to encourage long-term investments. These boundary conditions become assumptions about the context that can help enable Green Market Transformation. Next, the catalysts are reviewed – those causal mechanisms that actually bring about the deep greening of the building sector markets – that previous chapters detail.Our theory of Green Market Transformation argues that the dissemination of information through voluntary mechanisms can help address the barriers and market failures that produce the Valley of Death. It is hypothesized that these mechanisms include, though are not limited to, well-designed ecolabels and iterative demonstration projects that overcome market barriers by disseminating information about the cost and performance of nascent technologies to the marketplace, lowering costs and risks associated with the adoption of greener technologies.These predictive conditions and causal mechanisms form the blueprint for those seeking to engineer green market transformation.