Environmental Regulations and Innovation in Advanced Automobile Technologies

123

SPRINGER BRIEFS IN ECONOMICS

Ashish Bharadwaj

Environmental

Regulations and

Innovation in

Advanced Automobile

Technologies

Perspectives from

Germany, India, China and

Brazil

SpringerBriefs in Economics

More information about this series at http://www.springer.com/series/8876

Ashish Bharadwaj

Environmental Regulations

and Innovation in Advanced

Automobile Technologies

Perspectives from Germany, India, China

and Brazil

123

Ashish Bharadwaj

Jindal Global Law School

O.P. Jindal Global University

Sonipat, Haryana

India

ISSN 2191-5504 ISSN 2191-5512 (electronic)

SpringerBriefs in Economics

ISBN 978-981-10-6951-2 ISBN 978-981-10-6952-9 (eBook)

https://doi.org/10.1007/978-981-10-6952-9

Library of Congress Control Number: 2017955260

© The Author(s) 2018

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Technology certainly owes an apology to

ecology:

But, with synergy, it offers an opportunity to

fortify recovery.

To my mother, the strongest person I know,

for her generosity

Acknowledgements

I acknowledge with gratitude the financial support I received for my research from

the Max Planck Gesellschaft and the Max Planck Institute for Innovation and

Competition in Munich (Germany) during 2009 and 2012; and the Institute for

Innovation Research, Technology Management and Entrepreneurship (INNO-tec)

at Ludwig-Maximilians-Universität München (LMU), Munich, Germany, during

2012 and 2014.

I am particularly grateful to Professor Dietmar Harhoff, an academic giant in the

field of innovation economics, for providing me with the protected academic time

and continuous support.

This would probably not have been possible without friends who were an

integral part of my social support system. I have countless memories of spending

wonderful time with Thimo, Ana, Jason Alka, and Augustiner. Mrinalini brought in

the much needed positive vibe in our office room, and I am grateful to her for

introducing the idea of balance at work and in personal life. I remember numerous

discussions I have had with Owais, a colleague then and a dear friend now, on

various topics, related to our respective work and, sometimes, completely unrelated

to anything meaningful. My good friend Rahul was one of the reasons I always

looked forward to going back home to unwind from work.

I am forever indebted to my mother, Vinay, who has always put my interests

ahead of hers. I am always thankful to my family - Manasi, Pushpam, Gargi, and

Siddharth - for being a constant source of inspiration, for their uncompromising

words of wisdom and untiring words of caution. I am grateful to my partner, Richa,

for her help in understanding why writing this acknowledgment is important. As

with so many things, I did not appreciate them then as much as I admire them now.

Liankhankhup Guite, Joy Saini and Punkhuri Chawla helped with valuable

research assistance in preparation of this manuscript. I am thankful to Nupoor Singh

at Springer for her time and patience.

ix

Contents

1 Evolution of the Global Automobile Industry .................. 1

1.1 From Steam and Electricity to Petrol and Diesel.............. 1

1.2 The Big Three ...................................... 3

1.3 Rise of Non-U.S. Companies ........................... 4

1.4 Tightening Environmental Regulations..................... 5

1.5 The Rise of Brazil, India, and China ...................... 6

1.6 Conclusion ......................................... 7

References ............................................. 9

2 Changing Dynamics of the Industry ......................... 11

2.1 The Automotive Industry and Economic Growth ............. 11

2.2 Innovation in the Automotive Industry ..................... 13

2.3 New Technology and Related Issues ...................... 14

2.4 Recent Developments ................................. 15

2.5 Environmental Regulation and Innovation .................. 16

2.5.1 Theoretical and Empirical Evidence ................. 18

2.6 Overview of Green Automotive Technology ................ 20

References ............................................. 21

3 Environment, Health, and New Technologies .................. 23

3.1 Environment and Health Concerns........................ 23

3.2 Environmental Regulations and Growth .................... 24

3.3 Environmental Regulation and Innovation .................. 25

3.4 Environmental Regulation, Competitiveness,

and Firm Performances ................................ 27

References ............................................. 29

4 Role of State and Regulatory Instruments .................... 31

4.1 Environmental Regulation—Design and Instruments ........... 31

4.2 Environmental Regulations in the Automotive Industry ......... 33

4.2.1 Germany ..................................... 35

xi

4.2.2 India ........................................ 37

4.2.3 China ....................................... 41

4.2.4 Brazil ....................................... 45

References ............................................. 48

5 Where Do Brazil, India, and China Stand? ................... 51

5.1 Introduction ........................................ 51

5.2 Technical Background ................................ 52

5.3 International Patent Classification for Green Automotive

Technologies ....................................... 53

5.4 Matching Regulations with IPCs ......................... 56

5.5 Findings: Regulatory Stringency Index .................... 59

5.5.1 Germany ..................................... 59

5.5.2 India ........................................ 60

5.5.3 China ....................................... 61

5.5.4 Brazil ....................................... 62

5.6 Conclusion ......................................... 65

References ............................................. 68

6 Insights from the World of Patents.......................... 69

6.1 Patenting Trends Across Technologies and Markets ........... 69

6.2 Measures of Innovation ................................ 70

6.3 Data and Sources .................................... 71

6.4 Understanding the Dataset .............................. 73

6.4.1 Variables and Definitions ......................... 73

6.4.2 Legal Status .................................. 73

6.4.3 Application Fillings and Grants .................... 74

References ............................................. 79

7 Empirical Methodology and Findings ........................ 81

7.1 Introduction ........................................ 81

7.2 Regulatory Stringency: Unweighted Patent Count ............. 82

7.2.1 Principal Hypotheses and Model Specification .......... 82

7.2.2 Results ...................................... 83

7.3 Regulatory Stringency: Weighted Patent Count .............. 85

7.3.1 Principal Hypotheses ............................ 85

7.3.2 Preliminary Results ............................. 87

7.3.3 Alternate Model Specification ...................... 88

7.3.4 Results ...................................... 90

7.4 Standard Difference-In-Difference Analysis ................. 95

7.4.1 Model Specification ............................. 95

7.4.2 Results ...................................... 96

7.5 Findings........................................... 98

References ............................................. 99

xii Contents

8 Conclusion ............................................ 101

8.1 Managerial Implications ............................... 101

8.2 Public Policy Implications.............................. 103

8.3 Caveats and Future Research ............................ 105

References ............................................. 106

Contents xiii