A framework for understanding product market innovation paths – emergence of hybrid vehicles as an example

In the last few years, the automobile market witnessed a surprising rise in sales of a new type of engine: hybrid-electric engines. This is surprising, since the sector is typically averse to radical technological change of engines. The internal combustion engine has been around for more than 100 years after all. Economists have explained the dominance of internal combustion (IC) technology mostly from processes of learning and scale economies, which lead to lock-in of an established technology. Those theories have however, difficulties in explaining more radical technological transformations, which typically interrelate with changes in the social and regulatory context. In this article, we offer a framework for analysing the emergence of radical product innovation paths from a co-evolutionary perspective. The framework is applied for the case of emergence of electric and hybrid-electric engines on the automobile market after 1990.