Driving Innovation: The Policy Tools Powering Electric Vehicle Technological Inventions

• In Event: Innovation, competition, and tariffs: insights from EV value chains across batteries, vehicles, and charging infrastructure

Abstract

Electric Vehicle (EV) technology is widely viewed as indispensable for meeting the decarbonization targets of the transport sector. Yet, high purchase prices, limited range, and uneven charging infrastructure continue to slow adoption. Governments have responded with a broad portfolio of instruments, performance standards, fuel and carbon taxes, direct Research & Development (R&D) grants, and purchase subsidies, but evidence remains thin on how combinations of these levers stimulate upstream invention that ultimately drives cost reductions. Building on theories of induced innovation and policy-mix interactions, this paper offers a cross-national, firm-level assessment of how technology-push and demand-pull measures jointly shape inventive effort in EV-related technologies.

We compile annual counts of patents related to EVs, batteries, and charging technologies by extracting records from the PATSTAT database, using a targeted set of Cooperative Patent Classification (CPC) codes that capture innovations in these technology areas. Using patent data, we construct a panel of over 4,000 automakers, battery producers, component suppliers, and raw‑material firms headquartered in 18 major EV‑producing or consuming countries over 2010‑2021. Policy variables capture key dimensions of the operating environment: fleet-average emission-standard stringency, measured as the percentage tightening relative to the previous year; tax‑inclusive real gasoline prices; and targeted public R&D outlays for electric mobility. To approximate each firm’s exposure to national policies, we weight country-level policy measures by the firm’s share of patents in each country, reflecting the relative importance of each market in which the firm operates. The model also includes firm-specific internal and external knowledge stocks that capture accumulated technological capabilities and the broader innovation environment. These stocks account for the role of prior knowledge and spillovers in shaping a firm’s ability to innovate. Annual EV patenting is modeled using a one-year-lagged standard Poisson regression with year fixed effects, and we apply a pre-sample mean correction to address unobserved firm-specific characteristics.

Preliminary results reveal three main patterns. First, tightening emission standards by 10 percentage points is associated with a 6 percent increase in EV patenting, underscoring a potent interaction between performance mandates and innovation efforts. Second, additional targeted public R&D funding generally boosts inventive activity. Third, richer internal knowledge stocks and access to external cross‑sector spillovers both show robust positive associations with firm‑level innovation, suggesting that policy effectiveness is conditioned by companies’ absorptive capacity and the dynamism of the surrounding innovation ecosystem.

These findings have several implications. Coherent policy portfolios blending ambitious performance standards, credible long‑term price signals, and mission‑oriented R&D funding appear more effective than any single instrument. Governments can amplify returns by fostering cross‑sector collaboration through shared R&D platforms, open-innovation consortia, and spatial clustering of battery, software, and vehicle manufacturers to strengthen spillover benefits. Methodologically, the study contributes a framework for evaluating policy‑induced invention across emerging clean‑technology domains, while substantively it underscores the need for integrated, predictable policy frameworks to accelerate the transition to zero‑emission mobility.

Authors

• Jingni Zhang, Syracuse University
  Presenting Author

• David C. Popp, Syracuse University
  Non-Presenting Co-Author