Innovating Up, Down, and Sideways: The (Unlikely) Institutional Origins of Experimentation in China's Plug-in Electric Vehicle Industry
47 Pages Posted: 3 Aug 2016 Last revised: 22 Feb 2017
Date Written: February 21, 2017
A vast literature has attempted to understand the factors that accelerate experimentation and innovation in technologically-sophisticated emerging industries — but less is known about these processes in the context of industrializing nations. We apply inductive, grounded theory-building techniques to characterize and explore the origins of divergent innovation trajectories in once such context: the plug-in electric vehicle (PEV) industry in China. Triangulating annual vehicle make and model sales data for 2003-2014 (plus monthly data for the most recent five years); 112 English and Mandarin archival documents from industry, academic, and news outlets; and 51 semi-structured interviews across industry, government, and academic stakeholders, we develop four in-depth case studies. We find that in contrast to the innovation trajectories of the multinational and Chinese arms of joint venture (JV) firms, independent domestic Chinese firms (those with no historic JV partnerships) are undertaking significant innovation and experimentation in China’s PEV industry. Our results suggest that national institutions — specifically the formal JV and local content requirements — which discouraged PEV innovation in multinational firms and inhibited the capabilities of Chinese JV partners to independently develop their own PEVs resulted in a protected PEV market for independent domestic firms. The influence of these national institutions has combined with local institutional support in the form of additional market protection and subsidies to turn regional markets into protected laboratories for independent domestic firms to experiment with a variety of innovations. That said, for these domestic firms to grow beyond their early, protected regional markets, China will need to develop paths to national market integration.
Keywords: Innovation, Plug-in Electric Vehicles, China, National Policy, Local Institutions
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