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26 Jun 2014

Research : How public and private protection interact in the development of disruptive innovation?

Government support has been a decisive factor in the emergence of electric vehicles. Without the public protection, car manufacturers would not have been able to innovate at the pace that they did. Nonetheless, public protection is far from being sufficient. The way the manufacturers take advantage of it and respond to it through specific corporate policies has been the key factor for success.

This article by Jonatan Pinkse is the subject of the 2nd GEM LAB Executive Summaries.

From the article

The role of public and private protection in disruptive innovation : the automotive industry and the emergence of lowemission vehicle
J PROD INNOV MANAG 2013 ;31(1)
Jonatan Pinkse, René Bohnsack et Ans Kolk

The research is based on 9000 trade magazine and newspaper articles published between 1997 and 2010 and focuses on three pioneers in the field of low-emission vehicles (LEVs): General Motors (GM), Toyota and Daimler.

Alternatives to the internal combustion engine - electric, hybrid and fuel cell - not only are disruptive innovations, they also are socially embedded, and extremely complex to implement from a technical and logistical point of view. It has consequently been a huge challenge to make them attractive to mainstream customers.

Government intervention through regulation, tax incentives, and public-private partnerships has been necessary to rise to this massive challenge even if it did not always match the needs and plans of the industry nor had the looked-for impact.

The Zero Emission Vehicle (ZEV) Program: unrealistic goals, significant impact

Launched by the California Air Resources Board in 1990, this regulation mandating zero emission vehicles triggered the commitment of car manufacturers towards developing LEVs. While disputed by the car manufacturers' lobbies (like every other public protection studied here), it has been a stimulus with worldwide impact on the industry.

This research offers profound insight into the distinct paths followed by the manufacturers. Their results were very different even though they have been part of the same global environment, and have used the same private protection levers, such as niche occupation and dumping. In 1991, GM was the first to launch an electric vehicle, but cancelled this EV1 project in 2003 after having invested $350 million. GM's first full hybrid only came on the market in 2008, although Toyota had already sold over a million of its Prius hybrid, which had been introduced eleven years before.

The study examines the diverse strategies implemented by the car manufacturers, and shows that the appropriate combination and sequencing of all types of available protections, driven by a true corporate vision, is the main factor for success in projects such as the introduction of LEVs

KEY POINTS

  • Socially embedded disruptive innovations such as LEVs need to activate different levers of protection (public and private) in order to reach the mainstream market.
  • There is no simple and definitive way to bring disruptive innovation onto the market. Success here relies on the manufacturer's ability to adapt its strategy to its environment - the competitors' actions and the government incentives or regulations.
  • As shown for hybrid vehicles, private protection picked up the remains of governmental actions, and has gained momentum until today
Contacts
Mara Saviotti