David Teece in his concluding article “China and the Reshaping of the Auto Industry: A Dynamic Capabilities Perspective”  examines the Chinese automakers, in competition with foreign car companies, through the four paradigm shifts that are ongoing in the industry: vehicles are becoming electric, autonomous, connected and offer mobility as a service. These changes were introduced in a prior article by Teece as part of the The Dialogue, Debate and Discussion Forum on Tesla and the Global Automotive Industry.

The current Teece article explores a promising arena for studying an emergent, globally significant industry. Indeed the Chinese government sees automobiles as the potential battle ground for establishing a lead in high-tech, something that would not only add to the proper prestige of an emerging superpower but also provide potential leverage into other industries, in particular related to batteries as energy source and connected infrastructure more generally.

The Chinese automobile industry presents an interesting case for research in terms of the interaction between car companies and the transforming country government, which the article explores in some detail though it is not the focus of the analysis. The dynamic capabilities framework, introduced to pursue opportunities under uncertainty, speaks to firm behavior in sensing, seizing and transforming. However, the Chinese government plays a significant role in shaping the industry. “As China’s auto sector gradually opens to multinationals, the government has made sure that Chinese state-owned firms are not disadvantaged.” (Teece, forthcoming). As part of its industrial strategy, the government is developing its own dynamic capabilities, using the scale of the industry to its advantage: it is observing the many Chinese and foreign car makers as its sensing devices competing under uncertainty. Who emerges as the most capable? What are the competencies required?

Consider the “internet car” launched by the state-owned SAIC and Alibaba in 2017 according to Teece’s narrative. Their embedded control system called AliOS interests Ford and BMW also. Previously, Baidu had developed CarLife, leading to a voice-controlled system Apollo. Meanwhile, Tencent, another IT giant, is working towards “AI in Car” together with Geely and BYD. The stage is set for the battle, seizing the growth opportunities whoever emerges in the competitive shape-up as the most capable. There is no need to make bets as to who will win: The inherent uncertainty is eventually settled among the Chinese-led company constellations. Ambiguity is translated into a proper narrative that finds a way through the unfolding events.

The industrial strategy is highly darwinian and directive at the same time: not picking winners but shaping competitive battlegrounds to transform industry capabilities for the next high-tech and service-led era. What are the boundaries and means of such top-down transformative intentions, and what are the capabilities successfully pursuing electric, autonomous, connected and mobility characteristics on the part of car companies and their alliances competing for global leadership? Sensing, seizing and transforming are critical dynamic capabilities but need to be interpreted broadly in a game where government is a powerful shaper. Read about the ongoing debate here .