Radical innovation in a small firm: a hybrid electric vehicle development project at Volvo Cars

Abstract

The potential paradigmatic shift in technology from the internal combustion engine to electric propulsion via hybrid electric vehicles (HEVs) has been addressed by most automakers, and has produced very different outcomes. This paper uses the framework of core capabilities to discuss how the small automaker, Volvo Cars, made substantial progress in its HEV development using an approach based on limited resources and a low risk. A comparison with Toyota's successful but very resource-demanding Prius project reveals some factors contributing towards rapid development in a context of limited resources, including focused project objectives, tight collaboration with suppliers of the new technologies, reuse of existing technologies and an unaggressive, bottom-up approach to change the firm's values and norms and other core capability dimensions. This paper provides an empirical illustration of how a small company in a mature industry worked with radical innovation in a development project drawing on the combination of organizational slack, entrepreneurial employees and an extensive use of external (knowledge) suppliers.

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