Innovation in automative emission control technologies: Government actions, sources of innovation, and innovation strategies

This research aims to further our understanding of innovation under technology forcing regulation. Automobile emission control technologies provide an appealing case for this study because they were designed as a response to performance-based standards that were set by federal and state legislators to be higher than current technical capabilities in the industry. To date there exist little systematic micro level evidence that increasing stringency of regulations does provide incentives for firms to develop new technologies and virtually none as to the process by which this innovative response may happen. An important contribution of this research to literature is that it examines technologies in depth, rather than treating them as a "black box."; This research explores four aspects of innovation under "technology-forcing" regulations: (1) did the government regulation stimulate the development of new technologies? (2) who were the major contributors for the emission control technology development? (3) how did the supply-chain organize knowledge between assemblers and suppliers when faced with the uncertainties of developing new technologies to respond to the regulation? and (4) how did the cost of emission control devices change over the course of technological evolution?; The most important results and associated policy and managerial implications from this study include: (1) By creating a market for technologies through "technology-forcing", government regulations stimulated innovation in the industry and seemed to have provided incentives for firms to invest in R&D and develop new technologies; (2) the level of regulatory stringency has significant influence on the rate and direction of innovation activities; (3) over time, as technology evolved, assemblers increased their role as the locus of innovation, which entails that their role as "system integrators" is strengthened as the technological system gains greater complexity; (4) universities had a fairly low contribution to innovation in automotive emission control technologies, suggesting that the knowledge necessary for the innovations may have involved converting existing scientific knowledge into application-specific knowledge rather than expanding scientific frontiers; and (5) under the uncertainties created by the regulation, assemblers and suppliers strategically adjust their knowledge space, expanding their knowledge domains to each other's expert areas to help resolve uncertainty.