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5 Government Regulation: The Evolution of Public Demands on the industry THE ORIGINS OF REGULATION The development of automotive technology during the last 10 years has been strongly affected by government mandate. A variety of congressional committees and regulatory agencies have issued rules and standards intended to enhance safety, reduce air pollution, and cut fuel consumption. Although new in kind and degree, these demands on the auto industry are hardly without precedent. Almost from its inception, the automobile has had a far-reaching influence on the life of the nation. As a result, manufacturers have long had to meet both the evolving demands of the marketplace and the requirement of changing social expectation, whether expressed in the form of explicit govern- ment action or merely of diffuse public sentiment. Public Demands in the Formative Years At the turn of the century, many hailed the automobile as the guarantor of public health in urban areas and awaited the arrival of the "horseless age" with high expectations. Yet the American romance with the automobile sprang from deeper motives than the desire of city dwellers to be rid of the horse. First and foremost, the automobile statisfied a pervasive desire for personal mobility. Horses and bicycles had obvious limitations trolleys and railroads were rigid and inflexible. Moreover, rail-based transportation appeared to the public not only as monopolistic, corrupt, and unscrupulous but also--given its insatiable need for rails, tunnels, and overhead wires--as capital intensive, cumbersome, and centralized. In contrast,the automobile was quick, inexpensive, and immensely flexible. Timing and destination were at the discretion of the individual. A transportation system based on 76

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77 the car was at once democratic and decentralized. It required roads but little else. Although the desire for personal mobility was the principal force behind private demand for automobiles, that demand had a social dimension as well. In an age of growing urbanization and industrialization, the car seemed a solution to many of the prob- lems of large cities. It removed the horse, gave people access to the countryside, and offered (in the words of one proponent) to "eliminate. . . the nervousness, distraction and strain of modern metropolitan life."2 In turn, suburban living could become a quality, and some observers waxed eloquent in their descriptions of it: I magine a healthier race of workingmen, toiling in cheerful and sanitary factories, with mechanical skill and trade-craft developed to the highest, as the machinery grows more delicate and perfect, who, in the late after- noon, glide away in their own comfortable vehicles to their little farms or houses in the country or by the sea twenty or thirty miles distant They will be healthier, happier, more intelligent and self-respecting citizens because of the chance to live among the meadows and flowers of the country instead of in crowded city streets.3 In a heavily urban, industrial society, still wedded to the values of rural/agrarian life, the automobile had a social value beyond its private appeal. Between 1910 and 1925 the widespread use of the car was viewed as a progressive force in America, and its manu- facturers were accorded the respect due members of an industry that effectively met at a reasonable price the demands made of it. The private and public demands facing the industry in its early years were consistent and mutually reinforcing. Antitrust activity, no less than the desires of the consuming public, favored the mass production of automobiles. In 1903, Henry B. Joy of P ackard, Frederick Smith of the Olds Motor Works, and several other prominent manufacturers joined with the Electrical Vehicle Company, which held the Selden patent on the gasoline automo- bile, to form the Association of Licensed Automobile Manufac- turers (ALAM).4 ALAM members, largely high-priced producers catering to the luxury market, sought to limit entry by granting licenses only to manufacturers with prior experience in the business. Although a number of independent producers dis- regarded the Selden patent and entered the industry, the ALA M held 80 percent of the market in 1907.

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78 Early in its history, ALAM rejected Henry Ford's application for a license and thereby earned itself an implicable foe. Ford, which sought to produce a car for the great multitudes, fought the patent and the ALAM almost singlehandedly. Court action initi- ated by ALAM led to a decision in Ford's favor in the federal courts that hastened the demise of ALAM. When Ford himself came to dominate the market with his Model T. the integration of production proved a far more effective barrier to entry than the Selden patent, and there was no hint of antitrust activity. Both public policy and private need smiled on the growth of that kind of large-scale enterprise. A similar convergence of interest emerged with the federal government's long-term commitment to building and upgrading roads to complement the use of the automobile. The sheer magni- tude of the expenditures was extraordinary, but more remarkable still was the widespread popularity of state and local taxes--on property as well as gasoline--to support road construction. As Flink has remarked: Public support for heavy motor vehicle special use taxes is a case in point. Motorists early came to support higher and annual registration fees as one means of securing better roads. For the same reason, there has consistently been almost no public opposition to the gasoline tax. By 1929 all states collected gasoline taxes, which amounted to some $431 million in revenue that year, and rates of three and four cents a gallon were common. In 1921 road construction and maintenance were financed mainly by property taxes and general funds, with only about 25 percent of the money for roads coming from automobile registration fees.5 The New Deal and the War Years Public demands on the industry in the New Deal era were little changed from the 1910-1925 period. Expanded highway construc- tion further enhanced personal mobility, and the rhetoric of some New Dealers (even FOR himself) continued to idealize the notion of new communities that would combine the best of rural and urban life. Although the bulk of New Deal legislation (e.g., the National Recovery Act) had only minor effects on the auto industry, the passage of the Wagner Act, which legitimized collective bargaining, led to the organization of unions at General Motors (GM) and Chrysler in 1937 and Ford in 1941. Unionization has, of course, been of obvious importance in the industry's development, but in terms of products developed, markets served,

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79 and strategies employed, the social demands made on the industry during the 1930s largely continued trends begun much earlier. With the coming of World War II the industry's public responsi- bility was direct and clear cut--mobilize. The conversion to war production involved not only changes at the plant level but also the transfer of many top executives to high-level government pos i- tions. For example, William S. Knudsen, President of GM, was put in charge of war production in the War Department. And the industry produced. The magnitude of its contribution was striking, millions of guns, trucks, tanks, engines, and airplanes--in all, over one-fifth of all defense production. As John B. Rae has argued: The automobile industry was the country's greatest reservoir of "know how" and skill in the technique of making, accurately and reliably, the largest possible number of items in the shortest time.6 A Shift in Perceptions At the end of the war, most agreed with Rae that U.S. superiority in mass production techniques had been a major factor in the successful war effort. The auto industry was viewed as a valued national resource; its leaders were called on to serve in responsible public positions; its capabilities were admired and respected. This attitude lasted into the 1950s. In the period following the Korean War, a variety of concerns about the automobile industry and its impact on society began to surface. Initially focused on dealer practices, public scrutiny of the industry shifted to issues of pollution and safety? The emergence of these issues reflected, in part, the maturity of the industry. Not only were consumers becoming more sophisticated, but the sheer size of the U.S. car f feet made the side effects of driving more noticeable. Thus, while fatalities per mile driven were either stable or falling in the 1 950s, the total number of fatalities increased by 50 percent, reaching 30,000 by 1956. Likewise, in large urban areas, most particularly Los Angeles, the deterioration of air quality was noticeable. At the outset, pollution and safety were not burning national issues. N ewspaper coverage was infrequent and often buried in the back pages; congressional involvement was limited to modest authorizations for studies of the health risks imposed by smog and to a series of hearings before a small House subcommittee on traffic safety. Yet even these modest probes of the industry and its product marked an important change in the social demands made on the manufacturers. The mid-1950s witnessed the beginning of divergence between private desires, as expressed in

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80 t he market, and public concerns. At a time when the market sought larger, more powerful, more exciting automobiles, society generally began to question the effect of such cars on public health and safety. Disagreement and debate were perhaps inevitable, yet there was nothing inevitable about the form of that debate or of its results. Somewhere between 1953 and 1970 the public view of the industry was transformed. Its image of dynamic growth, superior technology, and progress gave way to one of unprincipled social irresponsibility. The Emergence of Regulation by Adandate The public search for cleaner air and safer highways emerged in full force in the mid-1960s. A burgeoning environmental move- ment, a growing aversion to large institutions and concentrations of power, and a backlash against wealth and conspicuous consump- tion made the automobile an easy target. Political points could easily be scored by attacking the industry on its safety record and on pollution, and this politicization of the issues had an enormous impact. The issue of safety is instructive.8 Rising numbers of auto fatalities in the early 1960s brought the issue of auto safety under greater public scrutiny. Hearings on auto safety were initiated in the Senate during 1965, primarily under the auspices of Senator Ribicoff's Subcommittee on Government Operations. Industry representatives reported on their companies' efforts to increase auto safety and stressed the need to include the effects of roads and drivers in any consideration of traffic safety. In November 1965, Ralph Nader's book, Unsafe at Any Speed, indicted the industry for what Nader believed was a callous disregard of the consumers' "body rights."9 The book helped focus government attention on the role of vehicle design in crash survivability. In early 1966 President Johnson called for a highway safety act to "arrest the destruction of life and property on our highways." Senator Ribicoff again held hearings on safety, and the Senate C ommerce Committee heard testimony on the administration's bill. Those hearings were conducted in a heavily politicized atmosphere. A few days before they began, GM's investigation of Ralph Nader was revealed, and GM executives were summoned before Senator Ribicoff's committee. Their lame explanations helped fix in the public mind the image of a big corporation harassing a concerned citizen. Before the GM-Nader incident the passage of some sort of legislation mandating regulatory standards had by no means been certain. Now it was.

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81 The administration's bill called for the Secretary of Commerce to set federal standards for equipment if, after two years, he determined that the automobile industry had not developed adequate standards of its own. As the hearings before the Commerce Committee got under way, the auto industry endorsed the goals of the administration's bill but suggested, instead, a voluntary plan. The political climate would not allow this, and the industry shortly changed its position in testimony before the House Interstate and Foreign Commerce Committee and supported federal authority to set safety standards. The Senate then passed a bill calling for mandatory standards, and President Johnson signed it. Partly because of GM's response to Nader and partly because of the political climate, the public demand for safer vehicles came to be embodied in a regulatory process involving mandatory standards, with the government and industry essentially in oppo- sition. The adversarial nature of the process was further sharpened in the debate over pollution. The government's first effort to control emissions, the 1965 amendments to the Clean Air Act of 1963, gave standard-setting authority to the U.S. Department of Health, Education, and Welfare (HEW). The initial legislation gave due weight to economic and technical considera- tions, and the regulations eventually developed in 1966 set fairly long-term standards that the industry believed it could meet. Industry optimism was short lived. In January 1969 the Justice Department charged the major producers with conspiracy to delay development of devices to control pollution. Settled by a consent decree in September 1969, the suit tarnished the industry's image and changed its relationship with the government. In November 1970 the Senate, taking stock of new realities, passed amendments to the Clean Air Act that established a standard of 90 percent reduction in pollutants over allowable 1970 levels to take place by 1975-1976. Furthermore, the Senate required that control devices be effective for 5 years or 50,000 miles and that administration of the law be taken from HEW and placed in the hands of the newly created U.S. Environmental Protection Agency (EPA). The law's provision for an optional delay of the standard by EPA led to a long series of public arguments, requests for extensions, and judicial and administrative proceedings, which resulted in a one-year extension. In the course of this debate, industry representatives made a series of arguments that subtly reinforced the image of footdragging and reluctance. The industry position progressed from "technologically it can't be done" through "the technology is untried and untested" to "it can be done, but it will cost so much it is not justified." Elliot Estes, President of GM, summed up the effects of the industry's approach:

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82 In dealing with the government--and in raisin g questions and explaining the possible difficulties and costs, we have reinforced the negative image that many people have of us--I don't know how it can be avoided. In all honesty, we have contributed to this lack of credibility because we wanted to see some promising results with real hardware before we predicted our ability to make progress in meeting some of these standards and rules.1 The pattern of regulation established for emissions has strongly influenced the government's approach and the industry's response to fuel economy. Choosing not to rely on taxes or the price of fuel to spur demand for smaller, more efficient vehicles, the government opted for direct regulation of fuel economy through the setting of standards by Congress and the administration of those standards by an executive agency. The decisive year was 1975. After several months of public s tatements, hearings, and proposals, President Ford obtained in early 1975 voluntary commitments from the major producers for a 40 percent fuel economy improvement by 1980 in exchange for a five-year moratorium on emissions standards. The industry hailed the agreements, but Congress proceeded to advance more strin- gent requirements. Efforts to impose various kinds of taxes on less efficient cars were discarded in favor of a bill requiring a mandatory level of average fuel economy for the corporate fleet. The industry questioned the viability of imposing cars with specific characteristics on a market that might not want them. Mandatory standards grew in political appeal, however, and President Ford abandoned his earlier agreements and signed the Energy Policy and Conservation Act of 1975 into law. An Adversarial Environment The motor vehicle regulatory environment that emerged in the 1970s is best characterized as a combination of congressional and agency rulemaking with administrative and judicial review. It is an inherently adversarial process, one that relies on the ex parse use of political power to achieve social objectives, for it took shape in an era when public opinion viewed the industry as a "bad guy" that had to be closely regulated. Indeed, the legislative record suggests that some members of Congress and their staffs have typically operated on the assumption that, if the industry does not oppose it, it must be too lenient. The automobile companies must, of course, bear partial

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83 responsibility for this poor relationship with government, but the explanation cannot simply be bad judgement, irresponsible behavior, or a lack of moral fiber in their leaders. There is, first, the growing divergence in the 1953-1975 period between the private and public demands made on the industry. A good part of the industry's position on safety emissions and fuel economy sprang, after all, from its desire to meet perceived market demands. But there is also the substantial ambiguity inherent in the regulatory process itself. The regulation of emissions, safety, and fuel economy involves ultimate objectives (e.g., safe highways) that are relatively uncontroversial, but practical means (e.g., specific equipment standards) that are open to debate. Further, even where standards and objectives are clearly linked (e.g., Corporate Average Fuel Economy standards), there may be technological uncertainty associated with both production and performance. 3 Recent regulatory history has been f illed with technological "optimism" on the part of regulators and "pessimism" on the part of the manufacturers. Experience has shown, however, that neither position is always justified. The development of the catalytic converter allowed the auto companies to meet emissions standards that they had once claimed were impossible, yet new fuel- economy goals created technical difficulties in meeting emissions targets by established deadlines. ~ . . . . . . . THE IMPACT OF REGULATION ON COMPETITION A N D I N N OV ATIO N Government involvement in safety, pollution, and fuel-economy decisions played a significant role in the design and manufacture of automobiles in the United States in the 1970s. A full analysis of the impact of regulation--on objectives and on overall economic and social welfare--is far beyond the scope of this report. It does seem clear, however, that the rules and laws adopted have not been neutral in their impact on competition or on the introduction of new technology. Competition and Regulation The form of regulation governing the automobile in the United States--mandatory standards administered by an executive agency--imposes a single set of standards on companies employing different competitive strategies and enjoying quite different capabilities. 4 Such regulation inevitably affects each fir m

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84 differently and thus alters relative competitive positions. A brief discussion of the difference between the G M and the Chrysler positions on the 1970 amendments to the Clean Air Act highlights the differential strategic impact of regulation. From G M's perspective, the catalytic converter--and the legislation to make it mandatory--had several advantages. It was a familiar technology and, as an add-on device, limited the need for fundamental changes in established manufacturing and assembly skills. Furthermore, as a backward-integrated firm, GM could view catalytic converters as a source of profit. Converter technology reinforced existing GM strategic strengths and did not make existing corporate strategy obsolete. Chrysler had a different strategic exposure to catalytic con- verters. The technology was relatively unfamiliar; as an add-on device it did little to create an opportunity for Chrysler to improve its competitive position against other domestic producers; as one of the least vertically integrated domestic producers, Chrysler had little opportunity to capture any value-added in manufacture or assembly of the devices. Chrysler's preferred compliance technology, which involved electronic technology and the lean-burn engine, played to its historic strength as an engineering-oriented firm. It did not penalize the firm for its lack of vertical integration and, indeed, made the relatively inflexible backward-integration strategies of its competitors less attractive. As a knowledgeable innovator in this area, Chrysler looked on such a technology as a competitive opportunity, just as GM did the catalyst. Government standards, however, finally ruled out all options but the catalytic converter. This kind of competitive consequence is a general feature of regulation in an environment where firms pursue different strategies and possess different kinds of technical competence. While proponents of regulations can (and do) claim some measure of success in forcing the adoption of the catalytic converter (among other innovations), the impact on competition and the relative success of the producers must also be weighed in the balance. This becomes particularly evident in comparisons of domestic ~~ ~ ~ is introduced as a factor all com- and foreign producers. When regulation in international competition, it is often said that since petitors must meet the same standards, regulation must be competitively neutral. However, where stationary regulations (e.g., those of the U.S. Occupational Safety and Health Admini- stration, and EPA's water and air pollution regulations) are not comparable, the overall regulatory impact may be different in different countries. Moreover, the notion that regulation is neutral ignores the fact that firm capabilities and circumstances are not identical. In a period of crisis and transition, such as the

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85 current one, heavy demands are placed on scarce resources simply to survive. Regulation that competes for those resources but that does not enhance a firm's competitive position becomes an added drawback. Although much has been made of the capital cost of regulation, the more critical and scarce resource is likely to be the time, energy, and attention of knowledgeable and talented individuals. Innovation and Regulation Proponents of government involvement in product design often point to a series of innovations that have emerged in response to mandated standards. And it is true that a number of technical advances can trace their origins (at least in part) to regulatory action. Yet in a more general sense it is not clear that the pace and character of innovation is necessarily enhanced by mandated standards.~5 To see the potential barriers to change inherent in regulation, it is important to distinguish between the radical or epochal innovations characteristic of the early stages of produc- tion development and the incremental innovations that dominate as a product matures. These two patterns of development may be observed at the same time when radically new products are intro- duced that challenge existing technology. Epochal innovation involves the identification of new needs or a new way of meeting old needs; it is essentially entrepreneurial in nature. It competes with the existing technology on the basis of performance rather than cost. Because markets for the new product are apt to be ill defined and because the manufacturing process is apt to be both labor intensive and fluid, the entre- preneurial firm may continue to make dramatic changes in the new concept. In this context, thin specialty markets play an important role in the development and commercialization of a new technology. Buyers in such markets share common traits: (1) a w illingness to pay high premiums for superior performance in a few limited dimensions and (2) a willingness to accommodate some performance deficiencies in the new technology compared with existing competitors. It is important to understand how the relationship between thin, performance-oriented markets and established mass markets affects the process of successful innovation and commer- cialization. At the point of introduction the new product is very vulnerable. It is often introduced by small, entrepreneurial firms or organizations that lack the resources to undertake major risks or to sustain high rates of R&D expenditures. The greater the established product's economies of scale and production volume, the greater the need for robust specialty markets to nurture

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86 i nnovations until they are able to compete within established markets. Government regulation can alter the innovation process through its effect on thin specialty markets. While the inhibiting effects of regulation can be subtle, they are nonetheless powerful and pervasive. The normal patterns of interaction between thin, high-performance markets and established markets may be disrupted in three distinct but related ways: (1) barriers to the initial development of new competing technolo~v mav increase. (2) existing technology may v ~ , ~ I' be enveloped with regulatory requirements so that no new technology can fully satisfy the web of constraints so created, and (3) regulation may encourage the entrenchment of current technology within the industry by diverting all discretionary resources to improve existing technology. The most obvious and frequently cited consequence of regula- tion on the innovation process is the barrier erected to the initial development of new products. This barrier results from the increase in resources, costs, and risks involved in developing and introducing new technologies. Turbochargers in California provide a useful example. 6 In the 1960s California erected a regional barrier to turbocharger development that had national implications. According to market surveys, California was the largest potential after-market for turbochargers, but the state prohibited turbocharger installation pending certification by its Air Resource Board. Certification required a durability test of at least 30,000 miles and thereby imposed requirements that were simply too complicated and costly for the small firms manufac- turing turbochargers. Thus, as a direct consequence of regulation, the thin speciality market that California offered for developing turbochargers for automotive passenger cars never materialized, setting turbocharger development back a number of years. Experience with air bags and air brakes suggests that uncer- tainty over standards also can serve as a barrier to innovation by supplying firms. As previously noted, the problem of setting clear and certain requirements is inherent in the nature of the regula- tory process. Though regulation may increase barriers to new firms seeking entry into the industry with innovative technology, it may also affect the involvement of established firms in the innovation process. Steadily tightening regulatory requirements forces companies to divert discretionary resources into programs to improve existing technologies, in effect entrenching the current technology within the industry. While this encourages more rapid incremental innovation, it may also discourage the entry of firms undertaking needed longer-term advances or epochal innovations. An intensification of regulation, whether by adding new kinds of

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87 requirements or by tightening existing ones, requires the manu- facturer to devote even greater resources to the existing tech- nology and market. As new requirements create new demands, R&D tasks associated with each change become more complex, costly, and subject to risks. Each change, too, becomes more costly while at the same time more changes are required. This escalation of development cost and complexity is clearly evident in the engineering interactions on new engine develop- ment new requirements and components interact with each other so that the effect on the number of subordinate design tasks, tests, and, ultimately, costs is more nearly multiplicative than additive. For example, the interaction of tough fuel-economy and emissions requirements for automotive engines has led to the addition of much more complex engine-control technology and carburetion systems, as well as catalytic converters and related components. Similar effects are reported for other drive-train components. The causes of entrenchment are subtle; their consequences, however, are vitally significant for firms in the industry. For example, to obtain the resources it needs to compete successfully in the highly regulated U.S. market, Chrysler has divested itself of many of its extensive foreign operations. In Ford's recent report on the state of the automobile industry, it documents a need for an additional billion dollars (adjusted for inflation) above its recent, historically high rate of capital investment in order to remain competitive in North America through 1985. By far the most subtle influence of regulation on the innovation process is regulatory envelopment. The stream of automotive regulations in the last decade has broadened substantially from the m inimum safety and pollution-control regulations of the early 1960s to the more extensive standards and rules of the late 1970s; Eugene Goodson has counted 237 regulatory changes pertaining to automobiles and light trucks from 1960 through 1975.~7 In this evolution of standards and rules, regulators have often favored performance regulations over design standards in order to preserve the manufacturers' freedom to innovate. They have also limited regulations to specific objectives and based them on the best available technology. In attempting to protect the innovative process by undertaking piecemeal regulations, however, government agencies may have achieved the opposite result. They may have created a sequence of independent regulatory actions that, taken as a whole, form a tightening web of constraints that envelop the existing technology. Fragmented performance regulations issued by different organizations become an overall design standard when the auto- mobile is considered as a single, integrated system. This unified design standard bars the entry of initially imperfect but potentially useful new technologies. The barrier effect may

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88 thwart the initial development of a new technology; envelopment bars the acceptance in established markets of such innovations as are made. Honda's CVCC program illustrates how envelopment may lead even a highly creative company to innovate incrementally. In their search for an engine concept that offered a competitive edge under impending U.S. and Japanese fuel-economy regulations, Honda's engineers rejected more radical engines such as the ~Jankel, steam, and electric. These engines were incompatible with the emissions, durability, cost, produceability, and fuel- economy profiles of current engines. Honda's engineers decided to develop instead the 50-year-old idea of charge stratification, relying on a particular combustion chamber configuration much like the Russian production-model Nilov engine. This more incre- mental approach has been successful. The case of electric vehicle certification under Section 212 of the Clean Air Act provides a contrasting example of blocked innovation. In an effort to encourage innovation with respect to emissions requirements, Congress authorized the U.S. General Services Administration (GSA) to pay a premium of more than 100 percent for low-emission vehicles to be used by federal agencies. In effect, Congress attempted to create through federal procure- ment policy a thin specialty market. Only three manufacturers of low-emission vehicles applied. All three offered electric vehicles that certainly met the emission requirement but that failed to meet other regulatory and GSA performance standards, which were based on vehicles then in use by the government. None of the applications led to Section 212 purchases. It is important to see the contradiction at work here. While the legislation provided a price incentive to support an essential but thin, performance- oriented market, it neglected to protect the developing product by relaxing regulations or standards geared toward the existing technology. The existence of thin. high-performance markets has been of Importance in the process of innovation. In light of the role of thin markets in furthering radical innovation, regulation often creates a paradox: while encouraging more rapid progress through incremental innovation in established products, intense regulatory pressure can also inhibit epochal innovation by its effect on thin markets, by increasing barriers to development of new technolo- gies, by entrenchment, and by enveloping existing technologies. .

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89 NOTES 1. This section draws on the work of Flink. For a more extensive discussion, see Flink (1970) and (1975) and the sources he cites. 2. Flink (1975), p. 39. 3. Ibid., p. 40. 4. A thorough treatment of the ALAM is found in Rae (1959), pp. 67-85. 5. Flink (1975), pp. 149-150. 6. Rae (1965), pp. 152-159. 7. For a discussion of the politics of safety regulation, see Halpern (1972~. 8. The chronology used here follows that developed in unpublished work by Karen Tracy of the Baker Library, Harvard Business School. For emissions and fuel economy, see Tracy (1978~. Additional insight is provided in several articles included in Ginsburg and Abernathy (1980\ see especially those by Mills, Seiffert, and Kaspar. 9. Nader (1965~. 10. Cited in Tracy (1976~. 11. Implications of this form of regulation for fuel economy are examined in John et al. (1980), pp. 118-143. 12. Disagreement over process is examined in Leone et al. (1980) and in Mills (1980~. 13. See Leone _ al. ~ 1980~. 14. This section draws on the analysis presented in Leone et al. (1980~; see also Hanson (1980~. 15. The sub ject of innovation and regulation has generated substantial literature. The perspective presented here relies on concepts and analysis developed by Abernathy (1980~; this section condenses one argument presented by Abernathy. 16. See Ronan and Abernathy ~ 1978a) for an extensive treatment of the introduction of the turbocharger. 17. Goodson (1977~. 18. Ronan and Abernathy (1978b).