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What will it take for the United States and China to move toward environmentally friendly technology such as electric cars and clean coal? Professor Robert A. Burgelman and Andrew S. Grove, a lecturer in management and former chairman of Intel, challenged students in their MBA seminar at the Stanford Graduate School of Business to examine how the two nations make strategic decisions about adopting electric vehicle and clean coal technologies.

Among their conclusions: The United States will move toward electric car adoption in the next 5-to-10 years, but progress will be slow unless oil prices rise rapidly and stay high. The Chinese electric car market will remain small during this time, but the country will have big opportunities in battery manufacturing and exports. Similarly, it appears unlikely that either country will quickly adopt clean coal technology. Hoping their work will influence policy makers, Grove sent a letter outlining the findings to U.S. Energy Secretary Steven Chu.

When looking at American and Chinese strategy, students were asked to pay close attention to what the countries actually did rather than what they said.
The research was published in a paper by Burgelman and Grove: “Toward Electric Cars and Clean Coal: A Comparative Analysis of Strategies and Strategy-Making in the U.S. and China. ”   Key findings included in the paper:

* The United States needs to adopt electric cars to reduce its dependence on foreign oil and reduce carbon emissions. However, consumer demand needs to be stimulated. The government should increase demand for electric cars through tax credits, more stringent CAFÉ standards (Corporate Average Fuel Economy— the government standard for a manufacturer’s fleet of cars) and continuing consumer incentives such as access to high-occupancy vehicle lanes.

* China is the leading manufacturer of Li-ion batteries and has an advantage as a low-cost manufacturing location. And its government is focused on boosting the competitiveness of its automotive industry. However, for widespread adoption of electric vehicles to occur in China, much infrastructure needs to be put in place.

* Strongly pursuing carbon capture and storage, to reduce the carbon dioxide emissions from coal, could demonstrate the U.S.’ commitment to acting on climate change. But the technology needs to be proven with full-scale demonstration projects.

* China has focused on energy initiatives that provide immediate economic benefits and maintain social stability, making it unlikely that the country will pursue carbon capture and storage technologies unless Western countries fund the project.

The researchers predicted that the United States will focus on adopting electric cars in the next decade, while China’s biggest opportunity will be in battery manufacture and exports. Neither country is expected to quickly adopt clean coal technology.

The slow pace of large-scale global change, the researchers said, is not surprising. Organizational-level conceptual frameworks tend to break down at the transnational level because no one nation is in control.

For the current project, students studied how organization-level frameworks can be applied to national and transnational strategy making. For instance they considered whether the governments would simply promote bottom-up strategic initiatives undertaken by various interested groups or impose top-down policies. For students, the seminar provided in-depth knowledge of a critical topic as well as an understanding of how to approach complex strategic issues.

Jamie Perencevich, MBA class of 2010, said the seminar gave him “the capacity to understand what’s in the mind of strategic decision-makers,” knowledge he hopes will serve him well when he goes to work for General Electric’s Energy Financial Services group after graduation.

Burgelman and Grove “did a great job of mixing what was happening in the real world with frameworks that helped us structure and understand what’s going on,” said Michael Ovadia, class of 2010, who spent last summer as an intern at the U.S. Department of Energy and is working on an interdisciplinary PhD in environment and resources along with his MBA. In the future he plans to do advisory work in sustainable development. “The seminar gave me tools and frameworks and ways of thinking that I could apply to any complex issue.”

For next year, Burgelman and Grove plan a different seminar, on the future of Silicon Valley. But there will be a connection to this year’s work: One of the industries that students will examine will be the automotive industry.

— Margaret Steen

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Also on Stanford Knowledgebase:

  1. Cars and Trucks for Energy Resilience Could Start with Retrofitting Old Models Today
  2. Removing Barriers for Clean Tech Energy Entrepreneurs Raises Issues
  3. Jeff Immelt, CEO and Chairman of General Electric: Pushing Change Can Be Unpopular

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