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Industrial policies and innovation: Evidence from the global automobile industry

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  • Barwick, Panle Jia
  • Kwon, Hyuk-Soo
  • Li, Shanjun
  • Wang, Yucheng
  • Zahur, Nahim Bin

Abstract

This paper examines the impact of industrial policies (IPs) on innovation in the global automobile industry. We compile the first comprehensive dataset linking global IPs with patent data related to the auto industry from 2008 to 2023. We document a major shift in policy focus: by 2022, nearly half of all IPs targeted electric vehicles (EV)-related sectors, up from almost none in 2008. In the meantime, there has been a clear technological transition from internal combustion engine (GV) technologies to EV innovations. Our analysis finds a positive relationship between policy support and innovation activity. At the country level, a one-standard-deviation increase in five-year cumulative EV-targeted IPs is associated with a four-percent rise in new EV patent applications. Firm-level analyses indicate that a ten-percent increase in EV financial incentives received by automakers and EV battery producers leads to a similar four-percent increase in EV innovations. We confirm the importance of path dependence in the direction of technology change in the automobile industry but find no evidence that EV-targeted IPs stimulate innovation in GV technologies.

Suggested Citation

  • Barwick, Panle Jia & Kwon, Hyuk-Soo & Li, Shanjun & Wang, Yucheng & Zahur, Nahim Bin, 2026. "Industrial policies and innovation: Evidence from the global automobile industry," International Journal of Industrial Organization, Elsevier, vol. 104(C).
    • Handle: RePEc:eee:indorg:v:104:y:2026:i:c:s0167718725000967
    DOI: 10.1016/j.ijindorg.2025.103230
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    Cited by:

    1. Tomaso Duso & Martin Peitz, 2026. "Aligning Competition Policy and Industrial Policy in the EU ±," Journal of Industry, Competition and Trade, Springer, vol. 26(1), pages 1-35, December.
    2. Johannes Gessner, 2025. "Shifting Gears: Environmental Regulation in the Car Industry and Technological Change Among Suppliers," CRC TR 224 Discussion Paper Series crctr224_2025_654, University of Bonn and University of Mannheim, Germany.
    3. Junda Li & Dwayne Woods, 2026. "Are you in the loop? China’s co-evolution dynamics," Journal of Evolutionary Economics, Springer, vol. 36(1), pages 1-41, April.
    4. Luo, Shulong & Wang, Yucheng, 2025. "The impacts of rate surge on electric vehicle charging behaviors: Evidence from California," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).

    More about this item

    Keywords

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    JEL classification:

    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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