Firms’ Tempered Radicalism in Global Entry and Scaling of Electric Vehicle Technology

Abstract

Insurgent technologies often find it hard to challenge established technologies when the latter is highly consolidated, and has insurmountable economies of scale. Firms attempting to change the status quo often have to look to global expansion as a default means of gaining scale in research and production. An example is electric vehicles (all-electric and hybrid) challenging the ubiquitous fossil-fuel powered vehicles. We find that successful entrant firms in such domains are best described as “tempered radicals”. They prefer to enter global markets that already have a higher established base of consumers for the radical version of the technology (all-electrics), instead of breaking new ground from scratch where such acceptance is minimal. Yet they are more able to enter new markets when they have a greater experience in working with the hybrid version of the technology. We identify these effects using instrumental variables, and empirically discuss contingencies of resources, capabilities, and existing local commitments of employment. However, even though tempered, such entrants ultimately are radical in their actions, such as by switching away from the hybrid versions to the radical version of the technology as they gain more experience in a country market, post-entry. Additionally such shifts in portfolios to the radical technology are moderated by existing size of fossil fuel production in a country, local competition, and other entries.