Strategies for green industrial and innovation policy–an analysis of policy alignment, misalignment, and realignment around dominant designs in the EV sector

Governments in industrialized as well as emerging economies are racing to implement policies to accelerate clean energy innovation and capture the economic benefits of decarbonization. This paper explores which combination of technology-push and demand-pull policies best situates a country to lead in clean energy innovation, as new or dominant designs emerge and replace older technologies. A new analytical framework for green industrial policy is introduced regarding the alignment, misalignment, and deliberate misalignment of policies. This framework is applied to battery electric vehicle drivetrain technology to examine the use of policy alignment and misalignment by countries with big automakers as they pursue strategic green industrial policy. We find that countries that achieved early and sustained (not inconsistent) policy alignment gained a first-mover advantage compared with countries that deliberately or accidentally misaligned their policies. We also find that first-mover advantage can be lost due to deliberate misalignment of policies caused by an inability of governments to effectively incentivize their firms to develop and deploy cleaner and more efficient technologies. In situations where governments adopt misaligned or conflicting policies, incumbent industries tend to pursue their prior comparative advantage and maximize return from investments in prior technologies. We also find that deliberate misalignment of policies can be an effective catching-up strategy.


Introduction
Governments in industrialized and emerging economies are racing to implement green industrial policies to capture the economic benefits of a global energy transition to mitigate climate change.Innovation policies are at the heart of this endeavor to develop advanced cleaner and more efficient energy technologies, diffuse mature energy technologies, and climb the economic value chain in emerging clean energy technologies needed for the transition.As countries contemplate the optimal mix of technology-push and demand-pull innovation policies to lead or catch up in these technologies, it is essential to understand how governments align or misalign technology-push and demand-pull innovation policies and the response of their industries as dominant designs emerge within a technology.Using the battery electric vehicle (BEV) drivetrain technology, this article examines the use of push and pull policy alignment and misalignment by countries with big automakers to pursue strategic green industrial policy and the implications for those where policies, government investments and/or industry interests are misaligned to the emerging design of preference.
The electric vehicle (xEV) (i.e.includes hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), fuel cell electric vehicles (FCEVs), and BEVs) represents a radical innovation as it disrupts the existing transport sector, its accompanying economic structures, and leads to the creation of new industries and economic opportunities (Bakker et al 2012, Berkeley et al 2017).Within xEVs, HEVs are an incremental innovation that combines a self-charging battery system with the traditional internal combustion engines (ICEs) to increase the fuel efficiency of a vehicle.Radical technological advancements in battery energy density and breakthroughs in new battery chemistries, such as the solid-state batteries, are disrupting the transport sector with substantial increases in BEV battery range and reduction in charging times (Davies 2023).Breakthrough improvements in water management to increase the performance and durability of fuel cells have made FCEVs more viable than before (Käfer et al 2023).However, diffusing these disruptive technologies and capitalizing on the possible economic opportunities depends on the effectiveness of a country's government and its industries in utilizing all stages, processes, and feedback of the energy technology innovation system (Grubler et al 2012).
Government is an important actor that implements supply-push policy measures such as public funding for R&D projects and demand-pull policies such as tax credits and vehicle emission standards for xEV adoption (Grubler et al 2012, Grubler andWilson 2014).Supply-push policies include an array of measures to 'push' new technologies from research and development stages further on along the technological learning curve towards commercialization.Besides the public funding for different innovation stages, push policies also encompass government support of the infrastructure to conduct research and development (e.g.technology incubators and accelerators), and protect it (e.g.patent protection).Demand-pull policies stimulate technological innovation by 'pulling' new technologies into the market.They also create new markets for the technology.These demand-pull policies can include consumer incentives such as tax credits and subsidies and or regulatory standards and taxes on competing technologies.Both push and pull policies are needed for successful technological innovation in clean energy (Nemet 2009, Gallagher et al 2012, Wilson et al 2012, Grubler and Wilson 2013).
Governments' ability to shape technological and industrial pathways strongly depends on the extent of their 'reciprocal control' over industry, however (Amsden 2003).A large-scale societal transition, such as the automotive sector transition, is often enacted by a wide range of actors with their own capabilities, strategies, and interests (Geels 2002, Köhler et al 2019).A transition from ICEs towards xEVs challenges the economic positions and established business models of influential incumbents.Consequently, these incumbents show resistance to change and are likely to protect their vested interests and contest both the necessity and pace of the shift to xEV (Wells andNieuwenhuis 2012, Smink et al 2015).Incumbent industries typically resist induced technological change as they prefer to protect their existing sources of near-term profit, otherwise known as the 'innovator's dilemma (Christensen 1997).These tendencies can lead to carbon lock-in (Unruh 2000) if governments do not induce industry to change.
Entrepreneurs are typically the 'creative disruptors' that bring new technologies that challenge incumbents (Schumpeter 1934) and eventually create a new dominant design (Utterback and Abernathy 1975).The term dominant design comes from the seminal work of Utterback and Abernathy (1975), who define it as the product that emerges from numerous design variations experimented in the early stages of product innovation, effectively moving innovation activities toward process innovations focused on the design (Brem and Nylund 2021) that is accepted as the market standard by competitors and innovators.Dominant designs emerge for various reasons, including consumer preferences (Utterback and Abernathy 1975), compatibility and scaling benefits of a design (Trencher and Wesseling 2022) from technological experimentation (Suárez and Utterback 1995), path dependence (Anderson and Tushman 1990), or when a pioneering new design by a single firm or entrepreneur result in an 'innovation shock' that disrupts the market in an unanticipated way (Argyres et al 2015).As dominant designs emerge, countries that align their innovation policies towards the design gain insuperable cost advantage as returns on investment in cost-reducing process R&D increase with scale (Klepper 1996), which can lead to firstmover advantage.Countries and their national automakers that previously misaligned their innovation policies and investments, respectively, to the future dominant design face a strategic choice to realign their policies towards the same.Similarly, national automakers who invested in incremental innovations in existing technologies and other new technologies face internal resistance due to their reliance on existing technologies for profits and the higher cost of realigning to the dominant design as latecomers, respectively (Argyres et al 2015).
Several studies in the innovation literature have discussed how governments align and sequence technology-push and demand-pull policies to promote clean energy technologies (Aflaki et al 2021, Grübler 2003, Nemet 2009, Hart and Kallas 2010, Horbach et al 2012, Peters et al 2012, Wilson et al 2012, Gallagher 2014, Costantini et al 2015, Zhang and Gallagher 2016, Choi 2018, Nuñez-Jimenez et al 2022, Xin-gang et al 2022).Studies in the strategy and innovation literature have discussed how government and firms respond to the emergence of dominant designs in a technology (Suárez andUtterback 1995, Argyres et al 2015), and specifically in the automobile sector (Choi 2016, Brem and Nylund 2021, Ferrigno et al 2022, Trencher and Wesseling 2022).Ferrigno et al (2022) show how Ford's intense technological experimentation at the turn of 20th century was an important catalyst for the emergence of ICEs as the dominant design and draws parallels to Tesla's efforts to develop the BEV technology and the likely 'innovation shocks' that may have resulted from the same.Trencher and Wesseling (2022) looked at the barriers to FCEV diffusion in different countries and concluded that the emergence of BEVs as dominant design, due to the rapid reductions in battery cost and economies of scale, is one of the barriers for FCEV diffusion.Few have studied how governments align or deliberately misalign push and pull innovation policies to pursue green industrial policy strategies to promote technologies such as xEVs.This article aims to bridge this knowledge gap and understand implications for the government and automakers as one design emerges as the dominant drivetrain for energy transition in the personal transport sector.

Framework
Policy alignment refers to a purposeful approach to innovation by establishing the right balance between technology-push and demand-pull policies to ensure increased innovation output and deployment to establish a strong industry around a specific technology.Aligned policies encompass an explicit strategy for supporting technologies through demonstration and testing to early deployment, and governments often implement domestic market formation policies to pull the technology into the marketplace (Gallagher 2014, Grubler andWilson 2014).Governments also purposefully create and exploit niche markets as part of the market-formation phase (Schot and Geels 2008).Policy alignment could be unintentional or incidental if a government push is aligned with natural market force pull where demand springs up for a new technology that was not anticipated by the government.
Policy misalignment refers to poor coordination or incoherence between technology-push and demand-pull policies to promote technology.Policy misalignment happens when the government fails to integrate technology-push and demand-pull policies into a coherent industrial policy strategy for technology development.Misalignment results from tensions between the government's green industrial ambitions and the industries that profit from incumbent technologies (Meckling and Nahm 2019), policy uncertainties resulting from changing government and industry objectives (Rayner et al 2017), failure to reform or 'sunset' (end) previous policies that supported prior generations of technology or incumbent industries (Unruh 2000) or pursuing multiple objectives in innovation policy (Grubler and Wilson 2014).A common misalignment is when a government makes R&D investments in renewable energy while simultaneously subsidizing fossil fuels to support the incumbent industry (Adyeye et al 2009, Grubler andWilson 2014).For instance, US public investment in R&D for low-carbon technologies was approximately US$33.46 billion over ten years between 2008 and 2017 (Myslikova 2023), while US fossil fuel subsidies amounted to US$37 billion in the same period (Aldy 2021).
'Deliberate' misalignment of push-pull innovation policies occurs particularly when governments pursue multiple objectives, including implementing industrial policy strategies, nurturing infant industries and incumbents, and creating new domestic job opportunities by promoting a particular technology.We define 'deliberate' misalignment as the government strategically misaligning technology-push and domestic demand-pull policies to create national comparative advantage, promote national champions, focus on technology-push policies to encourage domestic industries to exploit global market formation in a particular technology, allow time for national incumbents to catch up in an emerging clean energy technology, and sequencing domestic demand-pull until after technology costs reduce and domestic firms become competitive.Such 'deliberate' misalignment by governments often trades off the short-term clean energy transition outcomes for longer-term economic gains from the transition.Patterns of deliberate misalignment have been evident recently in the context of the global energy transition, with industrialized countries like the US and EU implementing green industrial policies to localize clean energy production and capture the economic opportunities of energy transition in their jurisdictions.
In response to the push and pull government policies, industry actors align or misalign their green development priorities based on a variety of factors, including domestic push-pull policies, global market formation policies, global (natural) market forces, firm-level technological experimentation and capabilities in a technology (Ferrigno et al 2022), firm size and past asset commitments (Argyres et al 2015), the ability of their component suppliers to manufacture for the new technology (Ishida et al 2017), and the firms' returns from existing comparative advantage (Christensen 1997).
We apply this theoretical framework to xEV, particularly BEVs, in the personal transportation sector, which appear to be emerging as the dominant design for the energy transition.The IEA Global EV Outlook 2023 projects that, under current policies and technology cost trajectories, BEVs and PHEVs together will represent more than 30% of all vehicle sales by 2030, with BEVs taking more than three-fourths of that share (IEA 2023a).Bloomberg New Energy Finance (BNEF)'s baseline projections for light duty vehicles (see figure 1) estimates that, by 2040, BEVs will account for more than 74% of new light duty vehicle sales, followed by 11% HEVs and 14% ICEs (BNEF 2023a).However, it is important to note that BNEF's projections are likely more optimistic as they are based only on technology cost reductions and the continuation of current policies.They do not factor in constraints such as: (1) component and raw material supply for batteries (Klimenko et al 2021, IEA 2023a), (2) ability to scale the charging and electricity infrastructure needed to reduce range anxiety (Ashfaq et al 2021) and (3

Methodology
We use a qualitative case study methodology to examine policy alignment and misalignment to BEVs by governments and national automakers in five countries with the fastest rate of adoption in the world-Japan, Korea, Germany, US, and China (see figure 2).We conduct a document analysis of academic articles, government policy reports, and media mentions about government policies and automaker decisions related to xEVs in each of these five countries to identify the timelines and patterns of policy alignment, misalignment, and deliberate misalignment towards BEVs.Based on the literature discussed in section 1 and definitions laid out in section 2, we developed a set of benchmarking questions to identify these patterns of policy alignment and misalignment (see table 1) across four time periods (see table 2) to write the case studies for each country (see appendix A for the case write ups).
We chose these five countries because all are currently in the xEV race for global markets, and automakers from these five countries dominate the global Table 1.Benchmarking questions to assess policy alignment and misalignment.

Assessment questions Yes No
Is there a push-pull pattern of policies to promote a certain technology?
Yes, alignment or misalignment.
No, absence of alignment Are there complementary push/pull policies for the pull/push policies?Yes, alignment.
No, misalignment.If there is only a pull, is it combined with disincentivizing incumbents?Yes, alignment.
No, misalignment.If there is only a push, is it combined with stopping the push of incumbents?Yes, alignment.
No, misalignment.Are there push policies to make use of global market-formation policies without domestic market-pull policies?Yes, deliberate misalignment.
Are the push policies combined with 'natural' market pull?Yes, alignment.
Is there an absence of market-pull policies despite technological/industrial capacity?Yes, deliberate misalignment.Is there a push and a pull, but protectionist policies that limit competition in the domestic market?Yes, deliberate misalignment personal transportation market.The pattern of xEV production (see figure 2) points to possible differences in strategies employed by these automakers to promote various xEV power trains in the past.Nevertheless, BEV investments made by automakers in all these five countries (see appendix B for details)

Pre-2010
The era of early BEV experimentation and the invention of HEVs, with significant experimentation by automakers from the five selected countries trying to cater to the global market formation policies of the US and EU, particularly the zero emissions vehicle (ZEV) mandate in California.

2011-2015
The era of xEV technology diversification, which involved a strategic retreat from BEV investments in some countries and its automakers, investments in alternative xEV drivetrains, and strategic bets on BEVs by some automakers who saw a market opportunity in the US due to its introduction of the federal tax credits for BEVs and PHEVs.

2016-2020
The era of contestation and technology convergence, Tesla's 'innovation shock' on the automobile sector and the Chinese leapfrog to BEVs Post-2020 The era of acceptance and scale up of BEVs, indicates the emergence of BEVs as the dominant design for sustainable personal transportation and the challenges faced by governments and automakers to reorient their policies to scale up BEVs.
appear to indicate momentum towards the technology after two decades of strategic investments in various xEV drivetrains.Significant variations exist in both the government and private sector roles (see table 3 for a summary of the respective roles in each).For instance, China's decisive industrial policy to leapfrog to BEVs stands in contrast with Japan's hesitant government policy despite Japan's originally superior technological capabilities in battery technologies.This is reflected in both the share of BEVs manufactured by their respective automakers (see figure 2-China's BYD vs.Japanese automakers like Toyota and Honda) and deployed in the two countries (see figure 3).
With these variations among governments and automakers as the starting point for the case study analysis, the article explores how governments have used technology-push and demand-pull innovation policy alignment and misalignment to pursue strategic green industrial policy in xEV technologies.How have the interests of automobile manufacturers in these countries shaped the respective country's innovation policy alignment and misalignment towards BEVs?What are the implications for governments and automakers with the emergence of BEV powertrain as the dominant design for energy transition in the personal transport sector?

Analysis of BEV national innovation policies and automaker strategies
This section analyzes how governments in China, Germany, Japan, South Korea, and the US aligned and misaligned technology-push and demand-pull policies over time to promote xEVs, particularly BEVs, and how their domestic automakers shaped and/or responded to the government's policies.Table 4 provides an assessment of BEV innovation policies and automaker strategies based on the benchmarking questions provided in table 1.

Pre-2010-BEV experimentation and the emergence of HEVs
Pre-2010 was the age of xEV experimentation, primarily driven by demand-pull policies in California and the US.The US state of California adopted a zero emissions vehicle (ZEV) mandate in 1990, pushing global automakers to invest in batteryand hydrogen-based vehicle technologies.In 1996, California's ZEV mandate included HEVs alongside BEVs and FCEVs.This shifted global automakers' attention, particularly the Japanese and Korean automakers, to align their supply-push efforts to HEVs.Japan and the United States made early efforts in RD&D.In 1993 the US federal government launched the Partnership for New Generation of Vehicles (PNGV) to encourage public-private RD&D on HEVs, for example.
California was the BEV testing ground for Japanese automakers.The Japanese government aligned its technology-push policies with the US demand-pull policies.Nevertheless, the costs associated with battery technology were prohibitively high at that time, hindering widespread consumer adoption of BEVs.Leading Japanese automakers shifted focus on HEVs-their early investments on BEVs and ICEs enabled them to quickly develop the HEV technology compared to others.
Except for Japan, government policies in the remaining countries were largely misaligned.The Korean government and automaker Hyundai-Kia invested on FCEVs and hydrogen technology.But Hyundai-Kia followed Japan's shift towards HEVs subsequently.Germany initiated a significant EV test (island of Rugen) in the 1990s, but the ministries showed little interest in the technology and ignored a proposal from the car and battery manufacturers for incentives to promote the development of EVs (Bohnsack et al 2015, Meadows 2020).The country began to formulate policy including R&D program towards EVs only in 2008, but still failed to enact demand-pull measures (Meckling and Nahm  In China, the government began its policy for 'new energy vehicles (NEVs)' (including HEVs, FCEVs, BEVs) in the early 1990s but after it became clear that the Japanese manufacturers were going to refuse to license hybrid vehicle technology, the Chinese government determined that the main clean technology pathway available to them was pure BEVs (Gallagher 2014).The Chinese government set the stage for their major leapfrog, motivated by Tesla's Roadster released in 2008 (Yang 2023).

2011-2015-drivetrain technology diversification
2010-2015 may be characterized as the period of drivetrain technology diversification.During this period, a shift in strategy can be observed among the countries and their automakers.While innovation policies in China began to align for BEVs, they were deliberately misaligned for BEVs in Germany, Japan, United States, and South Korea.
Under the Obama Administration, it cancelled FreedomCar and replaced it with the DRIVE partnership, which shifted the RD&D focus back to BEVs and advanced batteries.In the first true alignment in the US, the tax credit (of $7500) for xEVs was now instituted and more stringent Corporate Average Fuel Economy standards were implemented to create regulatory pressure for automakers to commercialize xEV models.Setting the quantum of tax credit based on a vehicle's battery capacity encouraged the adoption of BEVs more than PHEVs.The release of Tesla's Model S in 2012, reinvented BEV as a luxury product, disrupting the market in an unanticipated way (i.e.providing an innovation shock), paving the path for BEVs to become a design.
In China, the government continued to support R&D of xEVs in its 11th five-year plan (FYP) and launched a specialized plan on EV Science and Technology that emphasized BEVs.This coincided with the first industrial policy for NEVs in 2012, and in 2015 with xEVs included as one of priority industries (Made in China 2025 program).The government also stimulated the market through public procurement programs and announced a subsidy program for xEV promotion.Difficulty in accessing hybrid-vehicle drivetrain patents meant that most of these technology-push and demand-pull policies encouraged the development of BEV drivetrains by domestic Chinese automakers.
In contrast to the US and China, relatively little xEV demand-pull policies were introduced elsewhere.In Germany and Japan, and partially in South Korea, government policies supported incumbent automaker objectives by encouraging RD&D activities around their preferred xEV technologies.The German government funded RD&D without creating domestic demand-pull for the commercialization of BEVs, granting the German car manufacturers time to develop commercially successful models (Meckling and Nahm 2019).BMW attempted to launch its first BEV model in 2014/2015 but continued to prioritize HEVs (Isidro 2022).In Japan, automakers diversified their investment strategies earlier based on their relative comparative advantage in xEV technologies.By 2010, one could broadly characterize Nissan focusing on BEVs, Honda on FCVs, and Toyota on HEVs.
In South Korea, the government hesitated to promote BEVs in particular as Hyundai-Kia had invested heavily in hybridizing its automobile fleet (Thurbon et al 2021).

2016-2020-technology contestation and convergence
2015-2020 witnessed major reorientation of government innovation policies for BEVs alongside significant technology contestation among automakers followed by a gradual convergence to BEVs.Another Presidential election in the US induced yet another American policy misalignment even though US entrepreneurs continued to innovate and create markets for BEVs.Germany and South Korea strategically and cautiously realigned their policies and automaker investments to BEVs.Notably, in Germany, certain legacy automakers adjusted their strategies towards BEVs in response to greenwashing scandals.
In Japan, the first signs of realignment in government policies were observed.In Japan, while the government indicated some demand-pull alignment post Paris Agreement, automakers, except Nissan, deliberately misaligned their investments from BEVs towards HEVs and FCEVs.
The Chinese government accelerated its strongly aligned policies for NEVs during the 13th FYP, starting with an update to its industrial policy in 2016 (see appendix A for details).On the pull side, China released a new set of fuel economy standards combined with producer credits for xEVs, which had the result of forcing the traditional internal-combustion vehicle manufacturers to enter the xEV industry (lagging the entrepreneurial start-ups such as BYD).Successful new BEV start-ups emerged to supply the domestic market and position themselves for exports like XPeng and NIO.XPeng introduced its first BEV models in 2018 and currently offers five models, while NIO has six distinct BEV models as of 2023.
In Germany, the government implemented a strong demand side national stimulus program for emobility in 2016 through generous purchase incentives and vehicle tax exemptions (see appendix A for details).The government simultaneously announced a 2030 end date for new permits for diesel and ICE cars.Volkswagen and Mercedes' diesel vehicle emissions scandals in 2015 and 2019, respectively, pushed these major automakers to also realign their investments strategically to xEV technologies.Similar, but cautious realignment trends were observed in South Korea as it expanded its BEV demand-pull policies beyond public procurement to private purchases.Nevertheless, Korea's leadership championed a hydrogen economy and FCEVs in this period more than they promoted BEVs (see appendix A).

Post 2020-emergence of BEVs and scale up
In the post-2020 era, we finally observe all these major countries except Japan finally achieving full alignment around BEVs. Significant momentum was gained as the global market for BEV technology began to mature.Global BEV sales more than tripled between 2020 and 2022, accounting for 10% of the total light duty vehicle sales (BNEF 2023a).The governments in all five country cases, including Japan and Germany with reluctant automakers, have now aligned technology push with demand-pull policies.The US government strongly aligned its push-pull policies in the 2022 Inflation Reduction Act (IRA) to accelerate the transition to BEVs, but deliberately misaligned its demand-pull policy levers to maximize domestic rather than global BEV production.In a step that will insulate technology-pull policy from politics, the $7500 tax credit was extended in the IRA through 2032.In Germany, the government continues providing demand-pull incentives, but it has opposed a plan for a complete ban on the ICE vehicles that the European Union proposed in 2022/2023.Japan's government increased the BEV subsidy and South Korea's government announced ambitious plans in its 2020 New Green Deal to electrify its transport sector and gain a competitive advantage in BEVs and FCEVs.The Korean government set a target to produce 1.13 million BEVs and 200 000 FCEVs by 2025.And with the maturing xEV market in China, the government began to schedule a reduction of the purchase subsidies (Reuters 2023) and announced a battery secondary use management program.
Automakers are on the path to achieving breakthroughs and economies of scale in battery technologies (e.g.Toyota in solid-state batteries in 2023).And governments and automakers keep announcing further investments in next-generation battery research and components (e.g.K-battery development strategy in Korea), and ramping up BEV production.Nevertheless, not all automakers are fully aligned to BEVs.While some of the legacy automakers have announced long-term visions and goals to achieve a significant share of BEV sales (e.g.Volkswagen), others continue resisting change through diversified portfolios (e.g.Toyota) and active research in FCEVs (i.e.Hyundai, Honda, and BMW).

Innovation policy alignment and misalignment for strategic industrial policymaking
These patterns of innovation policy alignment and misalignment to BEV technology reveal that countries with big automakers and large domestic markets leveraged their market size in different ways.During the past 20 years, China steadily and strategically aligned domestic technology-push and demandpull to promote specific xEV drivetrain technology.The United States zig-zagged from alignment to misalignment to deliberate misalignment as politics whipsawed the coherence of government policy.Countries with relatively modest domestic automotive market size deliberately misaligned their technology-push policies domestically while aligning to global demand-pull (i.e. market formation) policies in the largest auto markets because they were accustomed to export-led growth (i.e.South Korea, Japan).Domestic pull policies were limited to experimentation and commercialization of the BEV technology or any xEV technology, waiting for global market-formation efforts to reduce technology costs for future domestic deployment (i.e.Germany).Nevertheless, automaker RD&D efforts and choice of specific technologies (in this case, drivetrains) in response to global market formation for xEVs significantly influenced the extent of government pushpull policy alignment and misalignment to specific xEV drivetrains and the pace of realignment to BEVs as it emerged as a dominant drivetrain design for the energy transition in the personal transport sector.
As the most consequential automotive market, the US is characterized as the 'Misaligned Disruptor' .The sub-national (but large) State of California led the global technology push and experimentation of xEV drivetrains through its strong domestic demandpull market formation policies to promote xEVs.While the briefly aligned strategic approach during the Clinton-Gore Administration in the 1990s was short-lived, the generous demand-pull initially in California and decades later at the federal level created the conditions for the emergence of new automakers like Tesla, whose 'innovation shocks' aided in the global convergence towards BEVs as the dominant design for personal transportation.
On the strategic end of the spectrum, China was the 'Strategic Aligner,' achieving the major leapfrog to BEVs by pursuing carefully coordinated, highlyaligned policies for BEVs and making use of its large domestic market for experimentation, commercialization, and scaling deployment of BEVs and its components such as batteries and battery management systems.China's strategic approach paid off, thanks to global innovation shocks that led to convergence towards BEVs.
Strategic hedging across the suite of xEV drivetrains has proven difficult for countries and their automakers now that they must realign toward the dominant design.South Korea may be characterized as a quick 'Strategic Realigner' to BEVs, emphasizing production and export markets.Its only major automaker group, Hyundai-Kia did not resist the dominant design and quickly caught up to global leaders, demonstrating a remarkably fast realignment.
On the other hand, Germany and Japan struggled the most despite efforts to pursue an industrial policy around xEV drivetrain technology.Strong deliberate misalignment in policy (technology push alongside weak technology pull) allowed their respective automakers to invest in RD&D across all the xEV drivetrains.The one important difference between the two was the evolution of domestic consumer demand.Germany may be characterized as the 'hesitant BEV conformist' .Public demand for accelerating climate action among European and German citizens hastened Germany's realignment to global technology trends by implementing strong demand-pull policies for xEVs after 2016, catalyzed by the emissions fraud scandals of two domestic legacy automakers.German automakers embarked on drastic change, including scaling down or writing off their investments in FCEVs to reorient towards BEVs as battery and other component costs decreased globally.Germany originally endorsed the proposed ban on the sale of ICE vehicles in the EU by 2035, a demand-driven approach to harmonizing the EU's policies for the adoption of xEVs (European Parliament 2022).Although the measure was not ultimately adopted in its original form, allowing the registration of ICE models beyond 2035 (Visnic 2023), it reflects a strong commitment to advancing xEV adoption in both Germany and the wider EU.
The lack of domestic demand in Japan, Toyota's innovator's dilemma with its market leadership on HEVs, and Honda's investment lock-in on FCEVs have made Japan the 'Resistant Hybrid Incumbent' whose automakers have continued to resist the emergence of BEVs as the dominant design.The government did not induce technological change beyond hybrids through policy.While Japan's technology-agnostic RD&D policies and its semiconductor industry investments in battery technology continue to provide a significant potential competitive advantage to realign to BEVs, its automakers' lack of focus on BEV product design poses a danger to its most consequential industry (Hiroaki 2022).

Reciprocal control and implications for policy realignment
Policy realignment to the emerging dominant design after periods of deliberate misalignment appears to be contingent on government objectives and governments' level of reciprocal control over their automakers.In democratic regimes, successive political administrations may have objectives that are modestly different or in stark contradiction with each other.In the United States, for example, the Democratic party has been more motivated to advance xEV development and deployment than the Republican party, although a bi-partisan Congress authorized sustained investments into RD&D of clean energy (including for xEV) even when President Trump recommended drastically cutting such investments in his budget requests.It was not until President Biden re-framed investments in an xEV industry as a job-creation and economic growth strategy rather than purely an emissions-reduction strategy that he was able to pass the trio of laws in the summer of 2022 that strategically realigned US policy towards BEVs, among other clean energy technologies.By contrast, the Chinese government always perceived investments in the xEV industry to be a strategic economic growth and job-creation strategy, with emissions reductions as a co-benefit.It identified the 'NEV' industry as a strategic industry early and maintained a highly aligned policy framework throughout the first two decades of the 21st century.Even so, China's traditional state-owned automakers initially resisted the shift to NEVs, creating space for entrepreneurial companies like BYD to secure firstmover advantage.
Strategic alignment depends on a government's ability to incentivize its automakers through policy.Contextual factors such as changes in public opinion, political shifts (especially in democratic regimes), intragovernmental convergence, and the automakers' level of innovator's dilemma also influence policy realignment.Dominant designs emerge in every industry, and history shows that incumbents and firms that pursued other design choices within a technology or sector invariably had to realign to the dominant design due to changing consumer preferences (Utterback and Abernathy 1975) and compatibility and scaling benefits of aligning to the dominant design (Trencher and Wesseling 2022).However, firms invested in non-dominant designs hesitate to realign for various reasons, including the innovator's dilemma of abandoning their competitive advantage on a different technology (Christensen 1997), deep integration of their component supply chain to a non-dominant design (Ishida et al 2017), and lack of know-how to catch up on the dominant design.Governments hesitate to realign due to pressure from incumbent automakers and when automaker supply chains are vertically integrated within the country around the old technology due to the fear of losing jobs in the short term alongside uncertainties in being able to recreate the same supply chain and jobs in the long term with the dominant design.Finally, the hesitation can also come from internal disagreement within government ministries about the technology of choice.
For instance, in countries like Germany, while automakers had prevented an early shift to BEVs, emerging public support for an energy transition, intragovernmental agreement to promote the diffusion of xEVs, and the automaker's lack of success on investments in other non-dominant designs such as FCEVs resulted in better policy realignment towards BEVs post-2020.In Korea where the automaker has been attempting to catch-up on various drivetrain technologies in the past, government's reciprocal control is observably stronger, thereby enabling a hesitant but faster realignment to dominant design.Policy realignment is the slowest (i.e.Japan) where the automakers face the innovator's dilemma of abandoning their competitive edge in a non-dominant design that is close to existing technologies, their component supply chain is deeply integrated with the local economy, and the automaker's share of country exports is significant essentially weakening the reciprocal control of the government.

Conclusion
This article examined how governments align and misalign their innovation and industrial policies to achieve green industrialization.We find that countries that achieved early and sustained (not inconsistent) alignment gained a first-mover advantage compared with countries that deliberately or accidentally misaligned their policies despite having strong automaker industry/legacy automakers.First-mover advantage can be lost due to deliberate misalignment caused by changing political preferences or a lack of an effective reciprocal control mechanism on the part of governments.In situations where reciprocal control is weak, policy re-alignment to dominant design is countered by industry motivations to pursue their prior comparative advantage and maximize return from investments in other technologies.We also find that deliberate misalignment can be an effective catching-up strategy.
The article also highlights how countries' alignment and misalignment of policies are increasingly motivated by multiple objectives, including the motivation to accelerate the energy transition through technological innovation alongside industrial policy objectives to economically benefit from the transition.Creating and retaining jobs onshore by both technologically advanced and catchup economies, has complicated the policy realignment pathway for countries with large automakers and relatively smaller domestic automotive markets.An important area for future research could be understanding how the trend of deglobalization through the domestic policies aimed at maximizing domestic jobs and economic gain within one's own country will affect global trends in clean energy innovation, global clean energy value chains, and the global pace of decarbonization.
) consumer choice for different xEV powertrains in different country contexts (Huang et al 2021, Jreige et al 2021, Forsythe et al 2023), and (4) the significant role of government policies to promote BEVs (Narassimhan and Johnson 2018), without which the expected scaling may not unfold.A more conservative estimate by Wood Mackenzie suggests that by 2050, BEVs are likely to account for 48% of the total light duty vehicle sales, followed by 44% ICEs, 5% PHEVs, and 3% FCEVs (Wood Mackenzie 2021).Given the global climate mitigation imperatives, a major share of these future ICEs sold are likely to be hybridized as HEVs to increase fuel efficiency.Scholars are still divided on whether BEVs would emerge as dominant over ICEs/HEVs by 2050, given the aforementioned barriers to BEV adoption at scale in comparison to the convenience of an incremental innovation like HEVs that does not disrupt the status quo (Bakker and Farla 2015, Yuan and Cai 2021).Nevertheless, as HEVs provide a low-carbon fuel efficient alternative to ICEs, BEV appear more likely than FCEVs or PHEVs to provide a zero-carbon alternative to ICEs/HEVs in a net-zero electricity future, as decreasing technology costs reduce the dependence on policy incentives (Li et al 2020) and new battery chemistries increase the driving range of a BEV (Liu et al 2022).

Table 2 .
Assessment time periods for the case studies.

Table 3 .
Summary of roles of government and private sector in the country BEV cases.

Table 4 .
Assessment of BEV innovation policies and automaker strategies.