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An Evolutionary Approach to Global Technological Development

December 11, 2012

Introduction and Motivation Who Killed the Electric Car (2006)


http://www.youtube.com/watch?v=nsJAlrYjGz8 http://www.youtube.com/watch?v=IENnSK8Q6nE 1:20:49

Why did the US stop development in this next-generation vehicle and how did Japanese firms come to be synonymous with hybrids? Semi-grounded case-study analysis of hybrid development Conclusion:
Country-level institutional environment supported Japanese innovation and gave them an economic head start when US institutional environment opened
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What is a Hybrid

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Evolutionary Framework Variation-Selection-Retention


Multilevel framework operating at the industry and country-level Variation in technological development, selection at technology and product, retention at product and country

Institutional Environment:
The neoinstitutional model essentially holds that organizational survival is determined by the extent of alignment with the institutional environment; hence, organizations have to comply with external institutional pressures. (Kostova, Roth, and Dacin 2008)
Global Automotive Industry

US Market
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Japanese Market

Euro Market
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Technological Entry Data

# of Patents 1 2 5 10 50 75 100

Firms 215 92 37 21 5 4 3

Note: Toyota Prius launched in 1997


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Technological Development

Paice, LLC developed key hybrid


4 of the top seven most dominant patents 1992 entry 1998 follow-up patent, which they also filed in Japan

2008 lawsuit against Toyota resulted in a mandatory licensing deal Lawsuit won against Ford and pending against Hyundai and Kia

Independent R&D available on the market


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Technological Entry Data Automotive Manufacturers


Nissan
First major automotive hybrid patent in this sample, applied for in 1974. Second application in 1978 Do not self-cite until their sixth hybrid patent, applied for in 1992

Ford
First hybrid patent in 1987. In 1992, followed up with Hybrid electric vehicle regenerative braking energy recovery system.

Toyota
owns 50% of the global patents on hybrid vehicles (Lloyd and Blows 2009) Did not apply for its first patent until 1992, of the last to develop their first hybrid patent. Started increasing quickly and built off of a battery-related Nissan patent

General Motors
First patent application in 1992 with a method for electrically-starting the power transmission Followed up in 1993 with a second patent focusing on the integration of the hybrid transmission with mechanical drive components
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California Air Resources Board (CARB) 1990 Zero Emissions Vehicle Mandate (ZEV)
2% of cars sold in California by 1998 to have zero tailpipe emissions 5% by 2001 10% by 2003

2002 - GM, Daimler Chrysler, and seven California auto dealers sue CARB to repeal the ZEV mandate
The US Department of Justice files a friend of the court brief in support of the suit and claiming that the state does not have the authority to regulate fuel standards

Reviewed after 2003 and mandate is repealed

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Who killed the electric car? (Originally?)

Document Source: GE Internal Documents

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GMs EV1
GMs EV1 built Ovonics battery supplier and AeroVironment technology On lease in California and Arizona from 1996-1998 First production-level vehicle to incorporate regenerative braking

GM CEO Rick Wagoner his worst decision: Axing the EV1 electric-car program and not putting the right resources into hybrids. It didnt affect profitability but did affect image. (Motor Trend, 2006) Robert Lutz, vice chairman of product development called Toyotas launch of the Prius a PR coup and GMs decision not to continue pursuing a hybrid car a mistake from one aspect, and thats public relations and catering to the environmental movement.
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Consumer Demand Characteristics Driving Cycle

US drivers average double the number of miles per year than those in Japan
Source: Transportation Energy Data Book 2010
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Consumer Demand Characteristics Gas Prices

Source: Transportation Energy Data Book 2010


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Product Data

Launch Year 1997 (Japan) Toyota 1999 (Japan and US) Honda 2000 (US) Toyota 2002 Honda 2003 Toyota 2004 Ford Honda 2005 Lexus Toyota Mercury Honda 2006 Toyota Lexus 2007 Nissan Lexus Chevrolet GMC Mazda

Brand Prius Insight Prius Civic Hybrid Prius Escape Hybrid Accord Hybrid RX 400h Highlander Hybrid Mariner Hybrid Civic Hybrid Camry Hybrid GS 450h Altima Hybrid LS 600h L Tahoe Hybrid Yukon Hybrid Tribute Hybrid

Car

Toyota in 1997 in Japan


Honda in 1999 Ford in 2004 Chevy/GMC in 2007

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Sales
Hybrid Electric Vehicle (HEV) Sales by Model (Thousands of Vehicles) 2003 2004 2005 2006 2007 2008

Vehicle Honda Insight Toyota Prius Honda Civic Ford Escape Honda Accord Lexus RX400h Toyota Highlander Mercury Mariner Lexus GS 450h Toyota Camry Nissan Altima Saturn Vue Lexus LS600hL Saturn Aura Chevy Tahoe GMC Yukon Chevy Malibu Cadillac Escalade Chrysler Aspen Dodge Durango Ford Fusion Mercury Milan Lexus HS 250h Sierra/Silverado BMW ActiveHybrid 7 BMW X6 Ford Lincoln MKZ Honda CR-Z Mazda Tribute Mercedes ML450 Mercedes S400 Porsche Cayenne Total

1999 2000

2001

2002

2009

2010

Total

17 3,788 4,726 2,216 1,200 583 666 722 0 0 20,572 20,962 55,452 5,562 15,556 20,119 24,600 53,991 107,897 106,971 181,221 158,574 139,682 140,928 955,101 13,700 21,800 25,571 25,864 31,251 32,575 31,297 15,119 7,336 204,513 2,993 18,797 20,149 21,386 17,173 14,787 11,182 106,467 1,061 16,826 5,598 3,405 196 0 0 27,086 20,674 20,161 17,291 15,200 14,464 15,119 102,909 17,989 31,485 22,052 19,441 11,086 7,456 109,509 998 3,174 3,722 2,329 1,693 890 12,806 1,784 1,645 678 469 305 4,881 31,341 54,477 46,272 22,887 14,587 169,564 8,388 8,819 9,357 6,710 33,274 4,403 2,920 2,656 50 10,029 937 907 258 129 2,231 772 285 527 54 1,638 3,745 3,300 1,426 8,471 1,610 1,933 1,221 4,764 2,093 4,162 405 6,660 801 1,958 1,210 3,969 46 33 0 79 9 0 9 15,554 20,816 36,370 1,468 1,416 2,884 6,699 10,663 17,362 1,598 2,393 3,991 102 102 205 205 1,192 1,192 5,249 5,249 570 570 627 627 801 801 206 206 17 9,350 20,282 36,035 47,600 84,199 209,711 252,636 352,274 312,386 290,271 274,210 1,888,971

Source: US Department of Energy, Alternative Fuels and Advanced Vehicles Data Center http://www.afdc.energy.gov/afdc/data/docs/hev_sales.xls (Davis, Boundy, and Diegel 2010)

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Demand for Green The Prius Effect

Consumers are willing to pay up to several thousand dollars to signal their environmental bona fides through their car choices (Sexton and Sexton, 2011) Home owners would rather put their panels on the front even if the sun shines more in the back. (Sexton and Sexton, 2011) Researchers have used the Prius as a proxy for going green Lead users where the car premium did not match the fuel savings (Berestau and Li, 2011) Penetration rate of hybrids had a positive diffusion effect on the Prius (Heutel and Muehlegger)
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Government Incentives
Japanese car buyers received a $3,000 rebate from the government for new-technology automobiles (Bradsher 2000) The United States IRS instituted a Clean Fuel vehicle tax deduction for $2,000 from 2000-2005. This overwhelmingly benefited Japanese automobiles Energy Policy Act of 2005 replaced the Clean Fuel deductions with a Hybrid Motor Vehicle Credit until 2010
The amount started at $2,400 for the first 60,000 qualified vehicles per manufacturer and then phased out over the following year Toyota met the 60,000 quota in October 2006, Honda in January 2008, and Ford in April 2010. On December 31, 2010, this credit expired.

Credits remain for even cleaner cars (electric vehicles, etc) Early on, hybrids were allowed access to HOV lanes in California

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Propositions

Proposition 1: Technological entry and product entry are separate decisions and can have different forces acting on them. Proposition 2: In this context, an industry-level selection mechanism acts to drive all firms into R&D for the next-generation vehicle, including HEVs. Proposition 3: Country-level mechanisms mitigate the selection mechanism and act more greatly on retention, in the form of product launches. Proposition 4: Even with country-level adaptation, home-country characteristics can drive important decisions that affect the global market.

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Conclusions and comments Builds on Kostova, Roth, and Dacin (2008) AMR critique of neo-institutional theory in MNCs Knowledge capability was present in the US and in the markets for technology Demonstrates a VSR-evolutionary framework for the development of hybrid-electric vehicles Presents countries as possible lead-user markets Combines neo-institutional theory as a starting point to resolve economic uncertainty

Further work:
European market Alternative Explanations Other theoretical frameworks
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Back-up

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Alternate

Honda small motorcycles Japanese and safety case of seatbelts Porter (1990) - Competition asdf

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Patent Entry
Assignee Firm Honda Toyota Freq. 180 172 Percent 13.03 12.45

Ford
Nissan N/A (only inventor no firm-level assignee) GM Aisin Hitachi Mitsubishi Suzuki Equos Research Bosch DaimlerChrysler General Electric Company Denso Mannesmann New Venture Gear Visteon Chrysler Caterpillar Hyundai Nippon Fuji Yamaha ZF Friedrichshafen AG Jatco Paice

116
94 83 67 45 41 27 27 19 15 15 15 14 12 12 12 11 10 10 10 9 9 9 8 8

8.4
6.81 6.01 4.85 3.26 2.97 1.96 1.96 1.38 1.09 1.09 1.09 1.01 0.87 0.87 0.87 0.8 0.72 0.72 0.72 0.65 0.65 0.65 0.58 0.58

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Patent Entry see data files

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