Association for Public Policy Analysis & Management

A vast literature has attempted to understand technology transitions within industries, but less is known about what conditions are necessary to bring about such transitions and the potential role of policy. We apply inductive, grounded theory-building techniques to examine what prompts firms to experiment with one emerging technology platform—plug-in electric vehicles (PEVs)— in China. Triangulating annual vehicle make and model sales data from 2003-2016 (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 experimentation across multiple levels of China’s emerging PEV technology platform. 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 and may be supporting the emergence of regional “laboratories” for diverse experimentation by Chinese independent domestic firms across the PEV technology platform.

While these findings illustrate how overlapping national and local institutions can unexpectedly lead to positive outcomes in terms of diverse experimentation in emerging technologies, the same diversity of localized conditions that leads to innovative variety may impede the emergence of strong regional or national market players in the domestic and global PEV industry (Barwick et al., 2016). Researchers have argued that eventually exposing firms to global competition is important for sustaining a strong national innovation system in the long term (Amsden & Chu, 2003; Nelson, 1993; Brandt & Thun, 2010; Feng, 2010; Meyer, 2008). It is thus unclear if the current protection from JV firms in the PEV industry will harm independent domestic firms in the longer term by preventing them from having exposure to foreign competition or incentives to compete in the global marketplace. Greater consolidation enabled by policy or competitive pressure may be required for PEV innovations to scale beyond their early, protected regional markets.