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This paper focuses on the relation between large car manufacturers’ incentive and opportunity to innovate and their Electric Vehicle (EV) business strategies. We analyze how environmental regulation and the firm’s incentive (measured by net income) and opportunity to innovate (measured by EV asset position, determined from a combination of patent, partnership and prototype data) affect EV sales over the period 1990-2011. During the EV’s R&D period in the 1990s, large car manufacturers that were regulated by the full Zero Emission Vehicle mandate developed a significantly stronger EV asset position, but did not sell significantly more EVs than their rivals. During the EV’s commercialization period (2007-2011), large car manufacturers with both a strong incentive and a strong opportunity to innovate sold significantly more EVs. Based on these results, the paper offers a typology of business strategies, several managerial implications and recommendations for policy makers to stimulate sustainable development.

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