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
Link to an older version: working paper
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