Alternative fuel vehicles turning the corner?: A product lifecycle model with heterogeneous technologies

The automotive industry may be on the verge of a technological disruption as different alternative fuel vehicles are expected to enter the market. Industry evolution theories are not unified in suggesting the conditions under which different types of entrant technologies can be successful. In particular, the competitive dynamics among a variety of technologies with varying potential for spillovers are not well understood. This paper introduces a product life cycle model used to analyze the competitive dynamics among alternative fuel vehicles, with explicit and endogenous product innovation, learning-bydoing, and spillovers across the technologies. The model enables in particular the exploration of the spillover dynamics between technologies that are heterogeneous. I explore how interaction among learning and spillovers, scale economies, and consumer choice behavior impacts technology trajectories of competing incumbents, hybrids, and radical entrants. I find that the existence of learning and spillover dynamics greatly increases path dependence. Superior radical technologies may fail, even when introduced simultaneously with inferior hybrid technologies. I discuss the implications for the prospective transition to alternative fuels in transportation. While the dynamics are discussed in relation to the automobile industry, the model is general in the sense that it can be calibrated for different industries with specific market, technology, and organizational characteristics.