The Inherent Difficulties with Implementing and Managing Change & Innovation that are derived from an article of Institutional Change in the Automobile Industry

A Review of "Institutional Change in the Automotive Industry" article by Van den Hoed & Vergragt, ISSN: 0966-9671-21092691


The theoretical arguments in the paper, of why Battery-Electric (BEVs) were not adopted, limit the analysis from a market perspective – normative institutions (van den Hoed, Vergragt 2006).  The paper understates the relevance of the U.S. Energy Act of 1992, that required alternative fuel vehicle use in some private/governments fleets, (Energy Policy Act of 1992 (EPAct 1992)).  This was under the leadership of former U.S. president George H.W. Bush.  The same leadership who ordered military operations in Panama & the first Gulf war, (The White House Retrieved, 2008).  U.S. military involvement in Kuwait, had much to do with the country’s oil reserves increasingly depleting, see Figure 1: U.S. Proven Oil Reserves

Figure 1: U.S. Proven Oil Reserves

Therefore, it is not surprising that when leadership changed in 1993, with Bill Clinton, in 1994, DaimlerChrysler decision to show fuel-cell demonstration vehicles and publicly declaring their commitment in this technology, had much to do with the regulative institutions ((van den Hoed, Vergragt 2006), put in place in Bush’s previous administration, as the result of the War creating spillover effect, (Stephen Martin, 2001) in fuel-cell R & D.  Whilst, the limitations of the BEV product-design are inherent, this also reinforces that in instances of this magnitude, large organizations are agents of change, (Schumpeter, 1943), irrespective of the normative institutions at the time.  Since then, 2005 and 2007 energy acts have been passed whose main agenda has been, to provide tax incentives for conservation and use of alternative fuels; and encouragement of biofuel development, (Energy Independence and Security Act of 2007).  See Figure 2: Depiction of automotive products and their ability to exploit innovation based on institutional changes.

Figure 2: Depiction of automotive products and their ability to exploit innovation based on institutional changes

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Subsequently, prior to these developments the U.S. had been sited has resisting endorsing the Kyoto Protocol, preferring to let the market drive CO2 reductions, (Regional Greenhouse Initiative 2006).  This highlights the inherent difficulty in managing change and innovation from a business, society and government perspective.  Therefore, the theoretical argument of social innovation coupled with technical innovation (Jonathan D. Linton, 2009), to enable innovative opportunities is heavily dependent on the flexibility of the organizational structure.  In this case study, the organization in question is actually the U.S. government-automobile industry partnership; the social perspective of innovation, (Jonathan D. Linton, 2009).   Now in 2009, we see the automobile transforming as the U.S. president Barack Obama has proposed an energy policy reform that focus’ on CO2 reduction with a cap and trade programme, (Carbon Finance – CDM, UNFCC)[1]. This form of continuous innovation has been driven by the external environment –markets, (Graves 1994), as previously desired by the pre-U.S. Government. 

In conclusion, this level of change and innovation requires transformation (visionary) leadership, James MacGregor Burns (1978).   It is not enough to just respond to a specific external directive (UNFCC), if the existing national (Hostede, 1961) social structure, technological capabilities and productions skills, do not enable it, (Jonathan D. Linton, 2009).

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[1] UNFCC – United Nations Framework Convention on Climate Change.

Copyright @ 4 March, 2011 for MBA Change and Innovation Management Case of Automobile Industry.  Adapted to BlogSpot by Tambudzai Ndoro, Non-Executive Director of Global Business Assignments Inc,