The Role of Public and Private Protection in Disruptive Innovation: The Automotive Industry and the Emergence of Low‐Emission Vehicles

Abstract

In the automotive industry, the need to move toward more sustainable trajectories of innovation has received much attention. Car manufacturers have started to develop lower emission alternatives for the internal combustion engine, particularly electric, hybrid, and fuel‐cell vehicles. They face the challenge, however, of how to make a potentially disruptive, systemic, and societally embedded technology such as a low‐emission vehicle attractive to mainstream customers. While literature has suggested that companies can empower the initial stages of disruptive innovation by creating protected spaces themselves and/or by taking advantage of such spaces created by public actors, the specific role of these different types of protection levers—private and/or public—has remained unclear. This article therefore investigates to what extent and how private and public protection levers affect firm‐level strategies to increase the attractiveness of disruptive and systemic innovations to mainstream customers. This is explored empirically through a multiple case study of the emergence of low‐emission vehicles within three car manufacturers—Daimler, General Motors, and Toyota—in the context of European, Japanese, and U.S. policies. The empirical analysis is conducted on a data set consisting of more than 9000 articles from two trade magazines, a car magazine and a financial newspaper for the period of 1997–2010. As main findings, the article identifies regulation, tax incentives, and public–private partnerships as the public protection levers that impose or stimulate “new” performance metrics such as fuel economy and vehicle emissions. It also finds that resource allocation, niche occupation, and collaboration‐integration act as the main private protection levers. In addition, two protection levers emerge from the data that are rather prominent in this context: the use of regulation imposing large‐scale commercialization of low‐emission vehicles and dumping of products in the market below cost price. The article concludes with two different protection trajectories—a public protection trajectory and a private protection trajectory—which explain how car manufacturers leverage the various protection levers to deal with disruptive technology. The main implication of the two trajectories is that while the public protection trajectory stalled due to the systemic, socially embedded technological impediments of electric vehicles and fuel‐cell vehicles, the private protection trajectory picked up the remains of the public protection trajectory and has gained momentum, continuing until today.