Strategic Innovation and Consumer Preferences: An Analysis of Malaysian Hybrid Car Policy

Abstract

This study analyzes the role of consumer choice in determining a strategic innovation policy. We establish an international Bertrand duopoly and conduct a choice modelling technique. The theoretical finding shows that an increase in investment in hybrid technology innovation increases the demand for hybrid cars. However, the empirical results show that consumers do not appreciate all attributes, only the hybrid battery, CO2 emission level and the sound of hybrid engines. We suggest that the government focus on the significant attributes in order to force not only the domestic automobile firm to innovate but the vendors as well.