Journal of Robotics, Networking and Artificial Life
Vol. 7(3); December (2020), pp. 184–189
DOI: https://doi.org/10.2991/jrnal.k.200909.009; ISSN 2405-9021; eISSN 2352-6386
https://www.atlantis-press.com/journals/jrnal

Research Article

The R&D Strategy of Automobile Companies
in Radical Innovation
Yousin Park1,*, Iori Nakaoka2, Yunju Chen3
Dept. of Business Administration, Prefectural University of Hiroshima, 1-1-71 Ujina-Higashi, Minami-ku, Hiroshima City, Hiroshima Pref., 734-8558, Japan
Dept. of Business Administration, National Institute of Technology, Ube College, 2-14-1 Tokiwadai, Ube City, Yamaguchi Pref., 755-8555, Japan
3
Faculty of Economics, Shiga University, 1-1-1, Banba, Hikone City, Shiga Pref., 522-8522, Japan
12ARTICLE INFOABSTRACTArticle History

This paper focuses on patterns of innovation and the R&D strategy of automobile companies for technological changes. Tushmanand Anderson (1986) pointed out that there are two types of technological changes: incremental technological change and radical
technological change. In particular, radical technological change may largely affect existing companies and new entrants forgaining competitive advantage in the emerging market. To examine this proposition, we use the patent information of existing
automobile company (Toyota) and new entrants (Tesla, BYD) to analyze their R&D strategies on electric vehicle by social
network analysis and cluster analysis. The analyses in this paper include the following: (1) To capture the radical and incremental
technological changes from each company’s R&D projects, and visualize these changes, (2) To examine the relationship between
technological discontinuities and the R&D strategies of automobile companies. We conclude that patterns of corporate R&D
strategy that cope with the threat of radical technological changes differ from company in automobile industry, and we suggest
the reason that cause this difference.

Received 31 October 2018
Accepted 21 May 2020
Keywords
Technological discontinuities
radical innovation
R&D strategy
automobile companies
patent analysis© 2020 The Authors. Published by Atlantis Press B.V.
This is an open access article distributed under the CC BY-NC 4.0 license (http://creativecommons.org/licenses/by-nc/4.0/).

1. INTRODUCTION
This paper focuses on patterns of innovation and the R&D strategies of automobile companies for these technological changes.
Tushman and Anderson [1] point out that there are two types oftechnological changes. One is incremental technological change
which is often generated by existing companies, and the other isradical technological change which sometime makes great extension in business environment and destroys the orders of existing
companies. Nowadays, traditional automobile industry is facedwith new challenges due to radical technological change such as
Car connectivity, Autonomous or assisted driving, new mobility
or car Sharing, Electrified powertrains and components (CASE).
New entrants, such as Tesla and BYD, are competing with existing
companies, such as Toyota, in R&D on electric vehicle. We supposethat R&D management can play a great role for gaining competitive
advantage.
Radical technological change may be happened and has impact on
existing and new automobile companies’ competitive advantages
in the emerging market. To examine this proposition, we use thepatent information of three automobile companies, the existing
giant Toyota, new powerful entrants Tesla and BYD, to analyze
their R&D strategies on electric vehicle by social network analysis and cluster analysis. The analyses in this paper include the following: (1) To capture the radical and incremental technological
Corresponding author. Email: ecventure@pu-hiroshima.ac.jp*changes from each company’s R&D projects, and visualize thesechanges, (2) To examine the relationship between technologicaldiscontinuities and company’s R&D strategies.

2. BACKGROUND
2.1. Technological Discontinuities
Abernathy [2] describes a dynamic model of innovation which
includes a pattern of sequential and cross-sectoral changes in product innovation, process innovation, and organizational structure.
Firms that are new to a product area will exhibit a fluid patternof innovation and structure. As the market develops, a transitional
pattern will emerge. Finally, the market stabilizes, and fosters a specific pattern of behavior.
Tushman and Anderson [1] demonstrate that technology evolves
through periods of incremental changes, punctuated by technological breakthroughs which enhance or destroy the competenceof firms in an industry. These breakthroughs, or technological discontinuities, significantly increase environmental uncertainty andmunificence. They point out that while competence-destroying
discontinuities are initiated by new firms and are associated withincreased environmental turbulence, competence-enhancing discontinuities are initiated by existing firms and are associated withdecreased environmental turbulence. Therefore, a radical innovation
can create new businesses and transform or destroy existing ones.

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Anderson and Tushman [3] suggest that the key punctuation
points are technological discontinuities and dominant designs;
these delimit eras of ferment and eras of incremental change. Sincetechnological innovation has great impact on firms, firms must
develop diverse competences both to shape and deal with technological evolution.

2.2. The Overview of Automobile Industry
Although as a new entrant, Tesla gives confidence and expectation to stock investors. For example, Table 1 shows the market
value of world top automobile companies, and we can see that
Tesla in the United States has higher corporate value than theexisting giant GM in the stock market of 2017. In addition,
China’s BYD has attracted attention for its global production
scale of electric vehicles. For instance, Table 2 illustrates the salesof electric vehicle from 2015 to 2018 based on single model. In
2018, of Tesla’s Model 3 ranks at the top, while BYD rank in
the top 1 for the total amount (in company base). Because thetechnology of electric vehicles nowadays may be radical innovation (product innovation and technological breakthroughs)
in the automobile industry, it may also become technologicalinnovation of competence-destroying discontinuities to existing
companies. In order to examine whether the technology of electric vehicles has impact on automobile companies’ strategies,
Table 1 | Market value of world top automobile companies
CompanyStock priceMarket Cap. (billion)$52$73$364$94$5$34$28$154
$11

172.1
78.3
59.7
56.8
53.2
51.9
50.3
45.5
43.3

ToyotaDaimler AG
Tesla Inc.
BMW
SAIC Motor Corp.
General Motors
Honda
Volkswagen
Ford
Source: Factset (Jun 2017).

185

we make a comparison of R&D strategies among Toyota, Teslaand BYD.

3. METHODOLOGY AND DATAIn the following sections, the patterns of R&D strategy of eachautomobile company are analyzed by social network analysis,
which can visualize the features of R&D strategies using archived
patent information.
We selected patent documents archived in patent database service provided by Patent Integration Co. Ltd. (Risonakudan Bld. 5F,
1-5-6, kudanminami, Chiyoda-ku, Tokyo, Japan). All patents areclassified according to the worldwide standard classification codes
International Patent Classification (IPC).
This paper utilizes all patents of automobile companies since 2000,
including Japan, America, China, and WIPO. First, we extract
related patents from the patent database service for collecting patents which are applied by each company. Next, we focus on somepatents of electric vehicle such as “Battery (H1), Charging (H2) andPowertrain (B60)”. IPC codes in Table 3 are the most frequently
used codes in electric vehicle.
In order to examine target companies’ R&D strategies since 2000,
we visualize their patent information in four steps, and then diagrams are created by these analyses. First, we count the numberof patent publications of each target company. Second, we conductsocial network analysis. Third, each company’s core rigidity, whichindicates the extent of core R&D members changed in R&D projects each year, is calculated and is expressed by heat maps. Forth,
we run cluster analysis by IPC codes of patents in order to visualize
the correlation between technologies that each company developed.

3.1. An Approach based on the Numberof Patent Publications
Figure 1 shows that Toyota (see the right axis) has overwhelmingly larger number of patents than other two companies.

Table 2 | Sales of electric vehicle (2015–2018)2015
1 Tesla Model S
2 Nissan Leaf
3 Mitsubishi Outlander PHEV
4 BYD Qin5 BMW i3
6 Kandi K11
7 Renault Zoe
8 BYD Tang
9 Chevrolet Volt
10 Volkswagen Golf GTE

Source: Inside of electric vehicles Website.

Salesquantity

2016

51,39043,87043,25931,89824,083
20,39018,846
18,37517,50817,282

Nissan Leaf
Tesla Model S
BYD Tang
Chevrolet Volt
Mitsubishi Outlander PHEVBMW i3Tesla Model X
Renault Zoe
BYD Qin
BYD e6

Sales
quantity

2017

51,882BAIC EC-series
50,994
Tesla Model S
31,405 Toyota Prius Prime/PHV
28,296
Nissan Leaf
27,322Tesla Model X
25,934Zhidou D2 EV25,299
Renault Zoe
22,099BMW i3
21,868BYD Song PHEV
20,610
Chevrolet Bolt

Salesquantity

2018

Sales
quantity

78,079Tesla Model 3
145,846
54,715BAIC EC-series
90,63750,830
Nissan Leaf
87,14947,195Tesla Model S
50,04546,535Tesla Model X
49,34942,342BYD Qin PHEV
47,452
31,932JAC IEV E/S
46,586
31,410BYD e546,25130,920 Toyota Prius Prime/PHV
45,68627,982 Mitsubishi Outlander PHEV 41,888
BYD Song PHEV
39,318BYD Tang PHEV
37,148BYD Yuan
35,699

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Table 3 | IPC of patents related to electric vehicle
Sub-technology

Sub-technology breakup

Energy storagesystems• Batteries
H01M 6/00, H01M 2/00, H01M 8/00,
i. Lead-acid batteries
H01M10/00, H01M 12/00
ii. Lithium ion batteries [Li-ion]iii. Nickel metal hydride [NiMH]
iv. Iron-lithium batteries
v. Sodium nickel chloride batteries• Ultracapacitors, supercapacitors, double layer capacitor• Fuel cells, secondary cells, primary cells• Electric motor types
B60K 6/20, B60L 15/00, B60W10/08,
i. AC motor, ii. DC motor, iii. Traction motor, iv. Induction motor
60W 20/00• Power Trasmission
i. Gear, ii. Brake, iii. Clutch, iv. Electric drive, v. Inverte, vi. Powerconverter, vii. Electric propulsion, viii. Electric machine• Powertrain control
i. Motor controller• Vehicle control and management, • Battery control and managementi. Charging control, ii. Battery management• HAVC control and management• Software
i. Vehicle user interface, ii. Charging interface• Charging
H02J 7/00• EV charging stations• Recharging methods• Thermal management in batteries
B60K 28/00, B60L3/00, B60R21/01, B60R22/00,• Other safety measures
B60T17/18, B60W50/02, B62D5/30,
B60N2/42, B60R22/00, B60R25/00

Powertrain

Control systems
and softwarefor EVs

EV charging
infrastructuresand chargers
Safety in EVs

IPC codes

Source: World Intellectual Property Organization.

Figure 1 | The number of patent applications of Toyota, Tesla, and BYD.

The R&D investment amount of Toyota is as ten times as TESLA
and BYD (see the left axis) may be the reason that causes this gap.
Figure 2 | Network of patent co-inventor of Toyota.

3.2. An Approach by Social Network Analysis
We visualize target companies’ R&D strategies associated withco-inventor of patent publication by social network analysis.
Figures 2–4 show the networks of patent co-inventor of Toyota,
Tesla and BYD in 2016. There are some blocks (cliques) in the networks of Tesla and BYD. However, existing automobile manufacturer, Toyota owns more complicated relationships of R&D projects
which does not consist of blocks.
Modular product architecture is functionally self-containedcomponent with interfaces well defined, and integrated productarchitecture are components designed or adapted for the specificproduct geometric or functional relationships tightly coupled.
Therefore, we suggest that structures of R&D projects of Tesla and
BYD are likely to follow the modular architecture of electric vehicles, and Toyota’s project organizations correspond to integrated
type of product architecture.

3.3. An Approach by Core Rigidities
Figures 5–7 are the heatmaps created to express the core rigidities of target companies. As mentioned above, core rigidities showthat if the same core members have been continuously active inY. Park et al. / Journal of Robotics, Networking and Artificial Life 7(3) 184–189

187

Figure 3 | Network of patent co-inventor of Tesla.
Figure 6 | Core rigidities of Tesla.

Figure 4 | Network of patent co-inventor of BYD.

Figure 7 | Core rigidities of BYD.

core member changes in Toyota is stable. Toyota may exploit thesame core members every year to take an improvement of its R&D
capabilities. On the other hand, Tesla and BYD have changed core
members constantly to explore their R&D capabilities.
In other words, Toyota may has maintained the incremental R&D
strategy, while BYD and Tesla have changed the existing R&D strategy into a new one at a certain time.

3.4. An Approach by Cluster Analysis
Figure 5 | Core rigidities of Toyota.

R&D projects, which also indicate the extent of technologies discontinuity conversely. From these heat maps, since the lighter
color indicates the higher rate of change, we find that core member
changes in Tesla and BYD happen frequently (per 2–3 years) andIn this session, we examine the technological fields that eachcompany focused on R&D by the IPC code. In Tesla’s case, it hasconcentrated on Battery (H1) and Charging (H2) for electricvehicles. In recent years, the importance of Powertrain (B60) for
Tesla has risen. In the case of BYD, it has the same tendency withTesla. Different from Tesla and BYD, Toyota has concentrated onPowertrain, but the importance of Battery and Charging arises inrecent years.

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These tendencies are also identified by the cluster analysis. We
run the analysis using IPC codes on every patent, and the resultsof cluster analysis are shown in Figures 8–10. We find that Toyota
and BYD have the similar cluster analysis results, but the cluster
analysis result of Tesla is different.
Because both of Toyota and BYD have produced mainly gasoline
vehicles and produced additionally electric vehicles, so that clusters of Toyota and BYD are divided into two blocks, gasoline (left)and electric cars (right), and the relation between B60 (Powertrain)and H01 (Battery) for electric car is very close. However, Tesla produced only electric vehicle since 2008, it has two main axes of H01,
B60, whose relation is far from each other.
Figure 11 shows the image of the weight of Electric Vehicle (EV) ineach company’s business domain.

4. DISCUSSION AND CONCLUSION
In this paper, we discuss the patterns of corporate R&D strategiesof existing company (Toyota) and new entrants (Tesla and BYD)

Figure 8 | Cluster analysis of Toyota.

Figure 11 | The weight of EV in business domain of each company.

under the impact of radical technological changes. In the case ofautomobile industry, we find the similarities and differences in theR&D strategy between Toyota, BYD and Tesla. However, why thesecompanies have taken different R&D strategies?
First, Toyota, whose core product has been gasoline engine, hasadopted R&D strategy that leveraged this. Its R&D project structure also seems to follow the integrate type of product architecture.
Toyota have pursued incremental technology change and sustainable improvement. Second, BYD, whose core product has beenbattery technology, wanted to use battery and developed plug-in
electric vehicle of world first in 2009. Recently, BYD has focusedon the development of EV. Third, Tesla may have been reorganized
R&D strategy by mass production of electric vehicle since 2014 andlaunched Model S and Model 3 as new models.
Based on the results of our analyses, the differences between
each company’s R&D strategies seem to be related to their business domain and core competence. Under the radical innovation,
Toyota has little change on its R&D project members, but enhances
its open innovation on electric vehicles with battery supplier (suchas Panasonic), so that we can suggest that the core competence offirms and the decision of boundary of firms should be consideredin analyzing the strategy to cope with radical innovation. We havealready discussed this issue on Chinese ICT companies [4], therefore, we should also pay attention to the firm’s boundary choice offirms in automobile industry.

CONFLICTS OF INTEREST
The authors declare they have no conflicts of interest.

Figure 9 | Cluster analysis of BYD.

REFERENCES
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[2]
[3]
[4]

Figure 10 | Cluster analysis of Tesla.

M.L. Tushman, P. Anderson, Technological discontinuities andorganizational environments, Admin. Sci. Quarter. 31 (1986),439–465.
W.J. Abernathy, The productivity dilemma: roadblock to innovation in the automobile industry, Johns Hopkins University Press,Baltimore, MD, 1978.
P. Anderson, M.L. Tushman, Technological discontinuities anddominant designs: a cyclical model of technological change,Admin. Sci. Quarter. 35 (1990), 604–633.
Y. Chen, Y. Park, I. Nakaoka, A comparison study on the vertical
integration and horizontal specialization of Chinese ICT companies, J. Robot. Netw. Artif. Life 4 (2018), 317–321.

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AUTHORS INTRODUCTION
Prof. Yousin Park

Associate Prof. Yunju Chen

He received PhD degree in Economics, from
Graduate School of Economics, the Kyoto
University, Japan in 2009 and now he iscurrently a Professor with the Departmentof Business Administration Prefectural
University of Hiroshima, in Japan. His
research interests include Management ofTechnology, Strategic Management, also
the industry of Information Communication Technology.

Associate Prof. Iori Nakaoka
He received PhD degree inEngineering, from Graduate School ofScience and Engineering, Ritsumeikan
University, Japan in 2006 and now heis working as an Associate Professor at
National Institute of Technology, Ubecollege, in Japan. His research fields aremanagement information system andcomputational social science.

She received a PhD degree inEconomics, from Graduate Schoolof Economics, Kyoto University.
She is now an Associate Professor
in the Faculty of Economics, Shiga
University, Japan. Her research’s
focus on the inter-organizational
strategies, and the management processes of technology development,
also the international comparativestudies in these fields.