Business Strategies of Incumbents in the Market for Electric Vehicles: Opportunities and Incentives for Sustainable Innovation

Abstract

This paper focuses on the relation between large car manufacturers' incentive and opportunity to innovate and their electric vehicle (EV) business strategies. We analyze how environmental regulation and the firm's incentive (measured by net income) and opportunity to innovate (measured by EV asset position, determined from a combination of patent, partnership and prototype data) affected EV sales over the period 1990-2011. During the EV's R&D period in the 1990s, large car manufacturers that were regulated by the full zero emission vehicle mandate developed a significantly stronger EV asset position, but did not sell significantly more EVs than their rivals. During the EV's commercialization period (2007)(2008)(2009)(2010)(2011), large car manufacturers with both a strong incentive and a strong opportunity to innovate sold significantly more EVs. Based on these results, the paper offers a typology of business strategies, several managerial implications, and recommendations for policy makers to stimulate sustainable development.

Incumbents’ diversification and cross-sectorial energy industry dynamics

“…Within the heavy vehicle transport sector Berggren et al (2015) illustrate how incumbents pursue contrasting technology strategies whereby both 'regime' and 'niche' technologies are developed simultaneously. Wesseling et al (2015) Karltorp and Sandén (2012) increasing firm divergence from a dominant technological path (or 'regime fragmentation') may indicate regime destabilization.…”

Car manufacturers’ changing political strategies on the ZEV mandate

“…Nevertheless, strong competition stimulates investments in various sustainable vehicle technologies (Wesseling et al, 2014) and some manufacturers are attempting to create new value and build up a competitive advantage through radical innovations like EVs (Wesseling et al, 2013). By focusing on radical innovation, they try to shift the competitive focus from the incumbent core technology in which they are less successful, to the new technology in which they may have built up competitive advantage (Wesseling et al, 2013). These innovative firms may engage in proactive political strategies towards the ZEV mandate to support the value creating strategies through which they comply with the mandate and further enhance their competitive advantage.…”

“…Over the past 15 years, car manufacturers have become increasingly active in commercializing low and zero emission vehicles, trying to gain a competitive advantage in this field (Wesseling et al, 2013;Pohl and Yarime, 2012;Wells and Nieuwenhuis, 2012). Literature indicates that firms also engage in CPAs to gain competitive advantage (Lux et al, 2011;Mathur and Singh, 2011;Lawton et al, 2013;Hillman et al, 2004).…”

“…Because ZEV technologies are radically different from internal combustion engines, the longtime core technology for automotive companies, they constitute competence-destroying innovations to incumbent manufacturers. This competence-destroying nature of EVs and HFCVs reduces car manufacturers' incentive to invest in and commercialize ZEVs (Wesseling et al, 2013). Therefore, policy intervention is important to support a transition towards such sustainable technologies (Van der Vooren et al, 2013;Lutsey and Sperling, 2010).…”

Who is in the driver seat? : Evolution of actors in the renewable electricity industry

“…Incumbents' assets and competencies for existing technologies reinforce their interests in old established systems. Consequently, incumbents are less willing to invest in technologies that are new to their business with uncertain outcomes (Nelson and Winter, 1982;Teece, 2007;Tushman and Anderson, 1986;Wesseling et al, 2013). Kolk and Levy (2003) explain that institutions including policy instruments can particularly influence the position that incumbents take on the ongoing sustainability transitions (see also, Oliver, 1991).…”