Abstract for: From Category Building to Industry Referent: Competition and Coevolution among Hybrid Electric Vehicles

This paper investigates the interplay between product differentiation and social exposure spillovers within an emerging product category. We explore a tradeoff involved in the timing of within-category differentiation: differentiation combines reduced competition with the other category members with reduced benefits from social exposure spillovers among alternatives. The latter also hurts legitimation of the category as a whole. This tradeoff suggests that new categories can follow different paths depending on the timing and degree of within-category differentiation. We examine these questions by: i) developing a conceptual model of category emergence; and, ii) empirically examining this in the context of hybrid electric vehicles (HEVs) in the United States between 2000 and 2010. In particular, we study interactions between the category’s most successful product – the Toyota Prius – and other HEVs. We find that the interaction between the Prius and other non-Prius HEVs is characterized, initially, by low differentiation and strong familiarity-spillover. In later periods, however, we observe high differentiation and low familiarity spillover. Our findings suggest implications for policy and strategy decision makers seeking to shape the path of new market formation – issues of particular interest to addressing climate change. We discuss our next steps: a formal dynamic model of category emergence.