Coevolving Technologies: Critical Dynamics in Industry Transformation

Jeroen Struben

(working paper, December 2008)

Abstract

How do firms allocate resources among multiple alternatives in a period of technological turbulence? The existing literature on technological discontinuities analyzes firm decisions and resource allocation in relation to an ex-post dominant technology. In doing so the process of technological development and the relationship between competing technologies is not considered, obscuring how the resolution of technological uncertainty itself contributes to industry evolution. I argue that a technology’s development and potential success is conditioned by interactions within and across systems of production and use. To examine this I develop a dynamic model capturing the mutual evolution of heterogeneous technologies, decision makers’ views, and resource productivity. A key finding is that an industry may break away to an exotic technology path through a cascading process. In this process moderately distinct technologies serve as a necessary scaffolding for increasingly exotic alternatives. Considering how clusters of related technologies compete and co-evolve also leads to novel explanations for contradicting evidence on organizational performance under technological turbulence and opens up new routes for theorizing. The general model is grounded in the case of alternative propulsion vehicles. Decision makers in the automotive industry must weigh investments in a multiplicity of alternative propulsion technology and fuel options, including advanced conventionals, biofuels, electricity, hydrogen, and various hybrids. My findings indicate that efforts to introduce highly distinctive technologies, such as hydrogen fuel cell vehicles, may falter despite their long run technological viability, unless a pathway can be identified through technologies with sufficiently related production knowledge and market characteristics.

Keywords: Technology Trajectory, Product Life Cycle, Radical Change, Disruptions, Spillovers, Learning, Resource Allocation Process, Co-evolution, Path dependence

Link to an older version: working paper

 

 

To Flounder or to Flourish: Exploring Fragility in Alternative Fuel Vehicle Market Formation

Jeroen Struben

(working paper, January 2009)

Abstract


This paper expands our thoughts on factors that condition the success of new technologies, through a study of alternative fuel vehicle (AFV) diffusion. Longitudinal data on natural gas vehicle introductions in New Zealand and Argentina, and ethanol vehicles in Brazil (failures and successes) demonstrate that their diffusion dynamics are strongly conditioned by multiple coevolutionary processes. Building on these observations, I develop a dynamic model capturing consumer behavior, technologies, infrastructure, and regulatory policies. Using the model to analyze empirical cases, I characterize AFV diffusion as a process of market formation which requires overcoming a period of fragility. Counterfactual analysis reveals that the duration required to overcome this stage are strongly influenced by institutional and historical contexts. Focusing on inertia in, and interdependencies between the adjustments of multiple factors helps explain why aggressive, simple strategies to overcome thresholds tend to fail. In contrast, actions that involve policy portfolios and that are synchronized and sustained across multiple types of decision makers succeed. More broadly the analysis suggests that how patterns are shaped by the reciprocal processes of technological systems across inter-organizational fields, the degree of inertness of its constituents, and the local circumstances, involving the built and institutional environment. Within this view traditional S-shaped diffusion curve is reconceptualized as a special case, with ex-ante usefulness confined to situations of low market complexity and favorable institutional conditions. I discuss implications for policy and strategy in the context of alternative energy technologies.

Link to an older version: working paper

 

 

Identifying challenges for sustained adoption of alternative fuel vehicles and infrastructure

Jeroen Struben

(working paper, September 2006)

Abstract

This paper develops a dynamic, behavioral model with an explicit spatial structure to explore the co-evolutionary dynamics between infrastructure supply and vehicle demand. Vehicles and fueling infrastructure are complementarities and their "chicken-egg" dynamics are fundamental to the emergence of a self-sustaining alternative fuel vehicle market, but they are not well understood. The paper explores in-depth the dynamics resulting from local demand-supply interactions with strategically locating fuel-station entrants. The dynamics of vehicle and fuel infrastructure are examined under heterogeneous socio-economic/ demographic conditions. The research reveals the formation of urban adoption clusters as an important mechanism for early market formation. However, while locally speeding diffusion, these same micro-mechanisms can obstruct the emergence of a large, self-sustaining market. Other feedbacks that significantly influence dynamics, such as endogenous topping-off behavior, are discussed. This model can be applied to develop targeted entrance strategies for alternative fuels in transportation. The roles of other powerful positive feedbacks arising from scale and scope economies, R&D, learning by doing, driver experience, and word of mouth are discussed.

Links: working paper

 

 

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