Abstract
This paper looks at how technological-forcing regulation has influenced the inter-firm relations when new technological innovation carried out under the technological uncertainty. In previous studies, technology-forcing approach, in which innovative activities are stimulated by the onset and enforcement of stringent regulation, is generally believed to be a more efficient way to bring about technological innovation. This paper, however, shows how firms respond strategically when facing technological uncertainty influenced by "technological-forcing regulation". Drawing on the case analysis on emission control technology development in the Japanese automobile industry, this paper shows that automobile assemblers expanded their knowledge base in components by building up in-house development when developing technologies that are relatively unfamiliar or new to their existing product base. The result suggests that strategic inter-firm relation is a key factor in achieving regulation standards and competitiveness of the regulated industry.
