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The evolution of flex-fuel technology in Brazil: The Bosch case

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 PICMET 2010 Proceedings, July 18-22, Phuket, Thailand © 2010 PICMET

The Evolution of Flex-Fuel Technology in Brazil: The Bosch Case

Abraham Sin Oih Yu1, Paulo Tromboni de Souza Nascimento1,
Francisco Emilio Baccaro Nigro2, Bjorn Werner Biben Frederick1,
Angelo Varandas Junior2, Saulo Fabiano Amâncio Vieira3, Rodrigo Luis Rocha4
1
Universidade de São Paulo, Business Administration Dept., São Paulo, SP, Brazil
2
Universidade de São Paulo, Mechanical Engineering Dept. of Polytechnic School, São Paulo, SP, Brazil
3
Universidade Estadual de Londrina, Business Administration Dept., Campus Universitário, Londrina, PR, Brazil
4
IPEN - Instituto de Pesquisas Energéticas e Nucleares, Institute of Energy and Nuclear Research, São Paulo - SP Brazil

Abstract--Flex fuel vehicles can be powered by any mix
whatsoever of gasoline and ethanol. Special software for fuel
identification and motor control is its main feature. Beginning in
2003, today already 23% of the Brazilian fleet and 95% of new
cars have been built using this technology. Bosch was the
pioneer in an early version in USA, in which it has been
investing since the 80s. Bosch also made the earliest prototypes
in Brazil (a GM car in 1994). But then Magnetti Marelli
championed the architecture that is ultimately successful in the
Brazilian Market: the so called software sensor technology.
Bosch seems to have been reluctant in adopting the software
sensor technology. Fixation in an early architecture, larger
global and American market share and relatively smaller
subsidiary in Brazil than Magneti Marelli are factors that seems
relevant to explain this lagging behavior. This case research
shows the importance of absorptive capacity and other
competition factors on determining a dominant design for flex-
fuel injection systems.
I. INTRODUCTION
Over the past few decades, the automotive industry has
engendered ample discussion across all fields of knowledge.
Discussion has been proportional to the size of the industry: it
is present in nearly all continents; it directly and indirectly
employs over 60 million people worldwide, and experienced
30% growth in the past decade [17]. These statistics confirm
that the auto industry exercises absolute economic and social
influence over the whole world. This industry also supports
thousands of suppliers the world over, stirring a wave of
innovations of every scope, from breakthrough to
incremental. In 2007 alone, the auto industry invested 85
billion euros in R&D geared at developing sustainable
technology, including alternative fuels. This search for
alternative energy sources is a response to the current
scenario of the intensive, centuries-old economic use of
hydrocarbons now being openly discouraged [23]. Support
for the “hydrocarbon model” was made possible by several
factors – society’s need for motorized travel, the construction
of infrastructure and superstructure [18], such as an extensive
network of gas stations, and government subsidies – and
supported by others: a strong relation to the oil and steel
industries. These subsidizing and supporting factors created a
complex, global, and mature network of relationships.
According to OICA [17], developing countries have been
increasing their use of motor vehicles at a rate of 16% per
year, showing that there is still room for such vehicles,
controversial as the matter may be. This unbridled growth has
been at the heart of heated debate between environmentalists,
governments, society at large, and automakers themselves, all
of which are searching for the “sustainable car”. One must
analyze the trade-offs of this dynamic, and ask how
technology can equalize the current model. Several solutions
have been proposed by world players in the sector to equalize
this situation; one such solution, proposed by Brazil, is based
on biofuels. Currently the world’s sixth largest manufacturer
of motor vehicles, Brazil has played a major role in the
industry for decades. Between the bumpy 1990s and a
comeback around 2005, a new factor has peaked world
curiosity: the probable new biofuel economy, benefited by a
technology (sugarcane ethanol) developed decades ago by a
shared governmental, social, and local corporate effort. This
alternative energy source has been used in Brazil in addition
to hydrocarbon-based fuels through the use of bi-fuel or flex-
fuel technology.
Flex-fuel technology was made possible in the Brazilian
context by several important innovations that preceded it:
development of power train technologies, including
electronic fuel injection (computerized control of air flow,
fuel intake, spark, temperature, and other variables), for
ethanol-powered cars. Electronic fuel injection, developed in
the 1970s, may be considered an example of breakthrough
innovation, as it completely superseded old mechanical and
electrical carburetor technology, replacing it with advanced
electronic hardware (ECU – Electronic Control Unit) and
software. In brief, electronic fuel injection controls the
combustion cycle, allowing several engine parameters to be
adjusted in fractions of a second, thereby improving
performance and reducing emissions. Electronic fuel
injection was developed in the 1970s and improvements
continue to this day. The landmark 1980 paper by Pefley et al
[19] is likely the first scientific study of the use of gasoline,
methanol, and ethanol mixtures as fuels for commercial
engines with electronic fuel injection systems.
Another relevant event was the creation of PROALCOOL
in 1975, which encouraged another breakthrough innovation:
the development of a 100% ethanol-powered car, which
entailed the development of a new engine with a higher
compression ratio than that of gasoline engines, in addition to
the development of new materials resistant to ethanol
corrosion for several vehicle components. Goldemberg et al.
[9] show that, since 1975, ethanol production in Brazil has

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 PICMET 2010 Proceedings, July 18-22, Phuket, Thailand © 2010 PICMET
followed a significant learning curve to reach levels that
compete economically with gasoline production. Public and
private investment towards the use of ethanol fuel over the
past 25 years has become a world example of sustainable
development [8].
In Brazil, the 1990s were characterized by a series of
advances and discussions in the field of flex-fuel technology,
led by tier 1 suppliers of electronic fuel injection technology.
Since the 1990s, gasoline marketed in Brazil was actually an
80–20% mixture of gasoline and anhydrous ethanol, known
as E20. In 2007, the ethanol percentage sanctioned fuel
mmixture was increased to 25% (a mixture known as E25)
[14]. Due to inspection issues, fuel distributed at gas stations
was commonly adulterated, reaching ethanol concentrations
of up to 50% (E50) [15]. This forced automakers and tier 1
suppliers to adapt vehicles and components to allow for
greater variation in the ratio of gasoline to ethanol.
Technically, the development of a fully flexible solution that
could run on anything from E20 to E100 was considered a
natural evolution. The fact that Brazil already has experience
in consumption of ethanol fuel and a ready, countrywide
infrastructure for ethanol distribution allowed immediate
adoption of biofuel by consumers. By 2008, 90% new cars
sold in Brazil were flexible-fuel vehicles [1,2], that is,
capable of running on a mix of gasoline and ethanol in any
proportion. Melaina [11] stresses the importance of
distribution infrastructure as a factor that may significantly
influence the large-scale adoption of a new fuel. The brazilian
automotive ethanol usage is a remarkable case considering
the myriad obstacles to get a contrywide solution as it is
today. For example Oltra and Jean [31] analyzed how French
auto industry was not capable to break the oil –fuel dominant
design, and reinforce the role of public policy and demand
conditions to push technological advances to reach a more
sustainable vehicle. Other example is how Canada is
Figure 1: Flex-fuel technology - source [16]
1251
seriously considering ethanol as a national solution to de-
carbonize transportation but still limited to ethanol-
production technologies more productive than ethanol from
grains [32].
In light of the above context, this study seeks to gain an
understanding of how the flex-fuel technology development
process occurred at Bosch as compared to its competitors
(Delphi and Magneti Marelli), to identify the main aspects
influencing this process, and to analyze relevant facts through
the theory of technological innovation management. The
main objective is to understand the reasons that the pioneer in
flex-fuel technology (Bosch) was not able to win the
technology battle in the Brazilian market. The present article
is structured into nine sections, namely: an introduction; a
description of flex-fuel technology; a historical review of the
development of flex-fuel technology in Brazil; an explanation
of our methodological procedures; a description of Bosch’s
experience with the development of flex-fuel technology; an
analysis of the Bosch case from the relevant innovation
management theories; and, finally, the conclusions of this
study, its limitations, and a suggestion of future research
directions.
II. WHAT IS FLEX-FUEL TECHNOLOGY?
Flex-fuel is the name given to any technology that allows
vehicles to run on gasoline, ethanol, or any combination of
both. The underlying principle of flex-fuel injection solutions
is the constant electronic monitoring of several engine
variables (air flow, fuel, temperature, sparking, and several
others), which are processed by a central computer and
specific software that commands engine function according
to usage conditions. The following schematic shows an
overview of the technology.
 PICMET 2010 Proceedings, July 18-22, Phuket, Thailand © 2010 PICMET
The greatest challenge of flex-fuel injection as compared
to the injection of low-ethanol blend gasoline (E25) or pure
ethanol (E100) is having to quickly detect and adjust for each
change in the gasoline-ethanol ratio. The first flex-fuel
solutions made use of a capacitive sensor that detected this
ratio before combustion, but these sensors were too costly;
due to the conditions of the Brazilian market, the additional
cost of installing a sensor was always a significant
impediment. The definitive flex-fuel solution was found in
post-combustion detection of the gas-ethanol ratio through
use of an O2 sensor (also known as a lambda probe) already
incorporated in the exhaust system. This technology was
made possible by a change in fuel flow (no fuel return),
ensuring a smoother transition between the composition of
“new” fuel and that of “old” fuel, improving engine
adjustment times. Capacitive sensor-free fuel detection
reduced the total cost of the fuel injection system, but the
software that manages engine variables had to be
significantly redeveloped. Flex-fuel management software
contains around 20% more lines of code for learning
algorithms that adjust engine operation to any usage situation
not predicted during laboratory testing but also requires
significant changes in other major software components.
Control software competence therefore became the main
differentiating factor of flex-fuel technology, and it is through
this competence that manufacturers of flex-fuel injection
systems, each with its own solution, compete among
themselves. Some automakers chose to develop their own
software solutions. Several patents of flex-fuel technology
have been deposited at the Brazilian National Industrial
Property Institute (INPI) [24], and the technology continues
to undergo constant improvement, with advancements such as
pre-heating ethanol for cold starts, obviating the need to add
gasoline.
III. HISTORY OF FLEX-FUEL TECHNOLOGY IN
BRAZIL
During the 1990s, the oil industry – represented in Brazil
by Petrobras – was obtaining considerable profits from high
international oil prices and systematically breaking its deep-
sea oil exploration records. Consumers were faced with a
difficult situation: if, on the one hand, rising oil prices were
driving up the cost of gas, on the other hand, drivers had lost
faith in the government’s alcohol fuel program after the
1989–1990 ethanol shortage during the sugarcane off-season.
This trust would not be rebuilt until the advent of flex-fuel
vehicles.
Brazilian government activity in the ethanol fuel sector
went through at least two distinct periods: the first followed
the 1973 oil crisis, with the creation of the National Alcohol
Program (Programa Nacional do Álcool, PROALCOOL); the
second coincided with the late 1980s, with decreasing oil
prices, increased world sugar prices, and diminished interest
in the program.
1252
One may conclude that strong antagonistic pressures were
at play: on the one hand, it was in the oil industry’s best
interest to maintain the status quo of fossil fuels being the
primary power source of Brazil’s vehicle fleet; on the other,
the sugar and alcohol industry advocated heavily for a
revamping of the Brazilian ethanol fuel program.
Flex-fuel technology was already known in other
countries. Bosch had already developed a flex-fuel electronic
injection technology, based on the use of a capacitive sensor
that detected the amount of ethanol mixed with the gasoline.
Ford and General Motors had both undertaken efforts to
develop flex-fuel vehicle programs, using alcohol as an
alternative fuel. Brazilian automakers maintain strong ties
with their headquarters, which do not always consider the
innovations proposed by their Brazilian branches to be
adequate. Even Volkswagen, which pioneered the launch of
flex-fuel technology, has had no support from its German
parent to introduce it in Europe. Apparently, government
incentive is necessary for large-scale adoption of flex-fuel
vehicles; in Brazil, the success of PROALCOOL paved the
way.
IV. METHODS
The present article is the result of a research project
conducted during the second semester of 2008 as part of an
University of São Paulo School of Economics and Business
Administration graduate course in Product and Process
Innovation Management. The project was conducted by two
professors and 12 students, with help from a Mechanical
Engineering Department Professor. Our goal was to analyze
the evolution of flex-fuel technology in Brazil. Professors
selected a preliminary set of reading material to which new
texts were added over the semester,. In parallel, we identified
the main actors involved in the development of flex-fuel
technology. One of the professors is an expert in engine
technology from Escola Politecnica (School of Engineering).
At the start of the semester, he gave two lectures on the
technological aspects of flex-fuel systems and the context in
which they were developed.
After identifying the actors involved in the process, we
conducted interviews with key informants from the main
organizations involved, including Bosch, Magneti Marelli,
Delphi, Volksvagen, General Motors, AEA (Associação dos
Engenheiros Automotivos, Association of Automotive
Engineers) and UNICA (União da Industria de Cana-de-
Açúcar, the Brazilian Sugarcane Industry Association).
Interviews were conducted by at least two professors and a
few students (usually three) throughout the second semester.
In order to understand the peculiarities of flex-fuel
technology development from the standpoint of automakers
and suppliers alike, we constructed an individual case study
for each actor.
The methods underlying this study were mostly based on
the proposals of Eisenhardt [5]. Her contributions are geared
towards construction of a descriptive/explanatory theoretical
 PICMET 2010 Proceedings, July 18-22, Phuket, Thailand © 2010 PICMET
snapshot of the study phenomenon through replicative case
research. The strategy of interviewing different actors was
meant to enrich our data pool [25] allowing new
interpretations and suggestion of future research directions
through broader use of available theories [5, 6]. The
methodological approach proposed by Eisenhardt [5] is
inductive, but it also carries a certain measure of
deductiveness. According to the author, when investigators
begin field research, they must already have developed a few
possible constructs to understand the study phenomenon.
Eisenhardt recommends that researchers avoid referring to
the theory or developing a theoretical framework as much as
possible before they begin analysis of empirical data. As for
this item, our research was conducted in a middle ground
between the perspective of Eisenhardt [5] and that of Yin
[26], who insists on the need for rigor and emphasizes the
development of a research question and a highly detailed
theoretical foundation prior to data collection. The wealth of
data we obtained allowed analysis to follow a replication
logic between cases and aided the identification of more
adequate theories for the analysis of each individual case [13,
26].
In the present study, we combined primary and secondary
sources. The latter consisted of articles, reports, meeting
minutes, prior studies, and legislation concerning flex-fuel
technology in Brazil. These sources were analyzed through
document analysis, a method that seeks to uncover and
characterize the social and economic circumstances
interfering with the activities of social players [20]. Primary
data collection consisted of semi-structured interviews lasting
an average of 2h30min (two hours and thirty minutes). Nine
interviews were conducted (one at Bosch, two at Magneti
Marelli, one at Delphi, one at Volkswagen, two at GM, one at
the AEA and one at UNICA1). Our choice of key informant
was based on how long the informant had worked for the
company, the extent of his or her involvement in the flex-fuel
technology development process, and his or her knowledge of
the technical and managerial aspects of the development of
this technology. Ultimately, we chose the Vice-President of
Robert Bosch Ltda., who played an active role in the
development of the first fuel injection systems to be
manufactured in Brazil and took part in the entire flex-fuel
technology development process. At the conclusion of our
interviews, we transcribed their recordings, and proceeded to
discourse analysis – our chosen method for study of interview
data, which were then treated through the mostly qualitative
technique of data triangulation. Interviews were transcribed
and analyzed through a rigorous, participative process
consisting of three mechanisms: analysis of articles on
innovation management and automotive technology,
classroom debates with all students and faculty members, and
secondary data collection. In each weekly class, professors
and students taking part in the interview process shared their
observations with the other students, enriching debate and
1
The interviewee was a former UNICA executive.
1253
seeking to corroborate opinions, raise new questions, and
confirm interviewed companies’ reports. Individually
debating each interview permitted efficient data triangulation,
dynamic updating of notes, and, most importantly, careful,
informed preparation of a script for future interviews. A total
of ten classroom debates of interview results were conducted,
each with accompanying analysis of related scientific articles.
V. THE EXPERIENCE OF BOSCH IN FLEX-FUEL
TECHNOLOGY DEVELOPMENT
The Bosch Group was founded in 1886 in Stuttgart,
Germany, by Robert Bosch (1861–1942) as the Workshop for
Precision Mechanics and Electric Engineering. It comprises
Robert Bosch GmbH and its more than 300 subsidiaries and
regional companies, present in around 50 countries. Bosch
has been present in Brazil since 1954, as Robert Bosch Ltda.,
which is the group’s main unit in Latin America. It supplies
components and systems for every automaker operating in the
country. In the Brazilian automotive aftermarket segment,
Bosch provides a wide range of products and a large network
of service partners. This worldwide development,
production, and distribution network forms the basis for the
company’s continued growth. Every year, Bosch invests over
€3 billion in research and development and applies for more
than 3,000 patents worldwide.
A. Corporate and R&D organization and its restructuring
In 2003, Bosch underwent an organizational restructuring
After restructuring, the company is now divided into business
units, which have decision-making autonomy within their
areas. The company’s Research and Development – R&D –
center is divided into areas, and development processes are
conducted on a worldwide basis. The company has an
Innovation Department and a system in place to evaluate
ideas, and files approximately 14 patents a day worldwide
(engineers are encouraged to develop ideas, and are rewarded
for viable ones).
Bosch has some 80 competence centers around the world,
three of which are in Brazil. After the development of flex-
fuel technology, in 2004 Bosch Brasil was elevated to the
level of Competence Center in the development of flex-fuel
and diesel technology. Bosch’s worldwide sales revenue is
around €45 billions and R&D cost is around 7% of earnings
around €3.7 billion. The R&D department of Bosch Brasil is
evolving significantly. In 1991, it was staffed by seven
engineers; on December 2008 that number exceeded four
hundred engineers.
B. Technological developments in the evolution of the Bosch
flex-fuel system
To better understand the flex-fuel technology evolution
process, we must first analyze the timeline of economic and
technological occurrences that contributed to the
development of a flex-fuel solution at Bosch Brasil.
 PICMET 2010 Proceedings, July 18-22, Phuket, Thailand © 2010 PICMET

TABLE 1: EVOLUTION OF FLEX-FUEL SYSTEM DEVELOPMENT (SOURCE: BOSCH – GS / MKT / 06.2008)

Year Technological developments
1952 Mechanical fuel injection
1985 Components for gasoline and ethanol: injector, pump, and pressure regulator
First vehicle with electronic fuel injection in Brazil – Gol GTI
1988
PI 8807885-0 patent for flex-fuel solution with O2 sensor – and no capacitive fuel sensor (software-based solution)
1992 Development of flex-fuel system and fuel pump module begins
1994 First flex-fuel concept vehicle in Brazil
1998 Application of torque-based system
Flex-fuel vehicle with drive-by-wire and torque-based system launched
2003
First tri-fuel vehicle introduced in Brazil

C. Pre-flex-fuel development of systems and components for
ethanol-powered vehicles
From 1983 to 1988, Bosch conducted development of
components capable of operating both in gasoline and ethanol
engines, and then exclusively in ethanol engines. According
to our key informant, this process was due to the fact that
Brazilian ethanol contains 6% to 7% water, therefore
increasing the corrosive potential of the fuel. Bosch
cooperated with the Institute for Technological Research
(IPT), a state owned research institution, in the development
of several components, most notably including a submerged
fuel pump and the injection system itself. As evidence of the
importance of these developments, 100% of flex-fuel pumps
currently in the Brazilian market are supplied by Bosch,
which, since 2001, has also exported in-tank flex-fuel pumps
for flex-fuel vehicles in United States.
D. Development of electronic fuel injection
Bosch was always involved in major technological
advances in engine management, working closely to
automakers and reacing teams, as described historically by
Amey [33]. Until 1986, Bosch’s technological know-how
was centralized in Germany. Not until 1988 did the company
set up an emissions lab in Brazil (with the cooperation of
certain automakers), importing a dynamometer for use in the
lab and hiring the company’s first development team in the
country.
According to our interviewee, the first Brazilian car to
feature Bosch electronic fuel injection (EFI) was the
Volksvagen Gol GTI, launched in 1988. In 1991, Bosch
would make the decision to manufacture multi-point or
single-point injection systems. In 1992, the first EFI for
ethanol-fueled cars was developed and deployed in a
prototype of the GM Omega. This information was
corroborated by the GM informant, who reported that
GM had been involved in flex-fuel technology since
1992, with Delphi and Bosch (already a longtime GM
supplier). The three companies (GM, Delphi, and
Bosch) walked down the [development] path together.
As proof of this, in 1994, we produced a prototype flex-
fuel Omega 2.0 (the first Brazilian car with flex-fuel
technology) in partnership with Bosch. The Omega
used the capacitive fuel sensor (which detects the fuel
mixture before it is injected into the engine). At the
time, the physical sensor carried a high cost, of around
US$100. This value has tripled by the time it reaches
the consumer. (interview with GM Brasil Product
Engineering Manager)
Around this period, sugar became an interesting export
option for the sugarcane industry leading to a shortage of
ethanol, as described by the key informant (and by the GM
informant as well). This shortage leads to development of the
“closed loop” separate ignition system, which runs on a
mixture of up to 25% of alcohol. This was the starting point
for development of flex-fuel technology at Bosch.
E. Evolution and market launch of flex technology
By 1994, a prototype of injection control software had
been developed to meet worldwide Bosch standards: safety,
low fuel consumption, and satisfactory emission levels. The
capacitive sensor solution had already been developed by
then; some components required for implementation of the
flex-fuel system were imported from Japan and some were
developed with partners. In mid-1994, Bosch’s know-how of
flex-fuel technology was published, in Brazil and the U.S., in
an SAE paper [3]. The reasons for this development were to
“take the burden of fuel shortage off consumers” and solve
the government energy matrix issues of the time. The system
was patented; however, Bosch lost royalty rights due to an
agreement with the Brazilian government. In 1994, the
Motronic flex-fuel technology was ready for market;
according to our interviewee, between 1994 and 1995 it was
“ready to go” thanks to a series of factors. In 1998,
Volkswagen requested that Bosch make a suggestion on the
deployment of a flex-fuel solution in VW vehicles. Bosch had
two ready-to-go options at the time: the capacitive sensor one
used in the U.S., considered expensive as Siemens and
Japanese suppliers charged upwards of US$100 for each
sensor; and the one based on oxygen (or lambda) sensor in
the works since 1988, which was recommended. Magneti
Marelli’s key informant describes the passage as follows:
At the time, technology was already available in the
U.S. to make a car run on alcohol or gasoline, by
means of a fuel sensor in the tank (technical solution).
Bosch tried to bring this technology to Brazil for the
Omega, but was unsuccessful. The sensor didn’t work
in Brazil due to the presence of water in ethanol fuel

1254
 PICMET 2010 Proceedings, July 18-22, Phuket, Thailand © 2010 PICMET
and due to the sensor’s sensitivity to high
temperatures. Another problem was the high equipment
cost (around US$100 at the time) and the operational
cost of including another part in the engine. Cost
therefore posed a major technical limitation. (interview
with Magneti Marelli Brasil Director of Engineering
and managers )
Around this time, in the 2000s, oil prices were high; 4
million ethanol-powered cars were in the streets; alcohol
producers had no market to speak of; due to price concerns,
consumers started “spiking” gasoline with alcohol, known as
a “cocktail” – in short, the market called for a solution. In
March 2000, the Institute for Technological Research (IPT)
organized a seminar on flex-fuel technologies. In one of its
sessions, Ford, Bosch and Volkswagen presented their
experiences with flex-fuel technologies, and the speaker from
Bosch defended the capacitive sensor system. The event was
a landmark for flex-fuel technology and served to raise
awareness amongst automakers and suppliers of the potential
of the dual fuel cars. In parallel, discussions among
Volkswagen, GM, and other players were duly formed to try
to define the emission standards for the flex-fuel engine. By
the end of 2002, the lambda sensor (software-based) solution
had been given the greenlight by CETESB (the São Paulo
state environmental protection agency, in charge of emissions
certification at the federal level) and the federal government.
The order from the VW of Brazil was for Bosch to
develop a flex-fuel solution for the VW Polo 500, which was
to be launched in February 2003. At the time, Volkswagen
had already chosen that its flex-fuel solution would be the
software-based one developed by Magneti Marelli:
Marelli proved to be the best solution for all
stakeholders, convincing automakers to deploy a flex
technology is done through their engineering teams.
Convincing was done on a technical basis; it’s the
engineering team that buys the idea. (interview with
Magneti Marelli Brasil Director of Engineering and
Engineering managers)
This led Bosch to restructure its production process to
make flex-fuel launch feasible using the software-based
solution.
Two weeks before launch, Volkswagen informed Bosch
that it would be launching the flex-fuel with Magneti Marelli
in the Gol family, a direct Bosch competitor, instead. VW
justified its decision on the basis that Gol could be launched
as a car for the domestic market, unlike the Polo, which is a
global model.
Our interviews showed that, for both Volkswagen and
GM, tier 1 suppliers are divided into vehicle categories –
Bosch usually supplied the high-end vehicle families. It is
1255
therefore the automaker that decides which car family will
launch which product – that is, launching a flex-fuel solution
from Magneti Marelli, Bosch, or Delphi is not merely a
technological decision. The GM interview confirmed that
flex-fuel development was conducted jointly with Delphi, and
Bosch, because when development begins with one supplier,
development with others will usually also occur. The GM
informant also reported that suppliers stay in contact,
informally, with one another, and automakers’ engineers
move among organizations, therefore knowledge is diffused:
When I start a project with a tier 1 supplier, I’m
actually starting it with them all. People talk. Everyone
knows what everyone else is doing. The only way to
stop it is through an exclusivity contract, which is very
rare. (interview with GM Brasil Product Engineering
Manager)
The first vehicle to be marketed with a flex-fuel solution,
the VW Gol, carried the Magneti Marelli solution. Brazilian
President Luiz Inácio Lula da Silva and the worldwide
President of Volkswagen were both present for the occasion,
which was the company’s 50-year anniversary celebration.
In September 2003, the VW Fox was launched with
Bosch’s software-based, lambda sensor solution, six months
after VW launched its flex-fuel line with Magneti Marelli
technology. Analyzing the set of interviews conducted with
Bosch clients and competitors, we found that Bosch
staunchly favored the capacitive sensor-based fuel injection
solution from a technical standpoint. Even though Bosch
pioneered R&D investment in flex-fuel technology – since
1980 –, it apparently displayed a technical inflexibility that
contributed to its being the third tier 1 supplier to enter the
Brazilian flex-fuel market. GM launched its flex-fuel car with
Delphi technology in June 2003.
The Bosch interviewee reported that technology has
evolved since the first generation of flex-fuel solutions; it
now features engine torque mapping, providing improved
steering. For every combination of engine torque and
rotation, there is an ideal injection ratio, selected among over
5,000 measurements/combinations:
The lambda probe system now has better performance.
Our challenge now is system robustness, which
involves far more than just software. (interview with
Executive Vice-President of Bosch Brasil)
Data collected during interviews allowed us to construct
Table 2 and Figure 2 comparing the path taken by Bosch,
Delphi and Magneti Marelli, all suppliers, in the “flex-fuel
race”. Detailed descriptions of the development of flex-fuel
technology in Delphi and Magneti Marelli are in [27, 28]
respectively.
 PICMET 2010 Proceedings, July 18-22, Phuket, Thailand © 2010 PICMET

TABLE 2: THE RACE FOR FLEX-FUEL TECHNOLOGY BETWEEN BOSCH, DELPHI, AND MAGNETI MARELLI
PHASES / COMPANIES M. Marelli Delphi Bosch
1988
Bosch California begins
development of a flex-fuel
— — solution. Bosch obtains patent
for fuel detection sensor
Fuel sensor
Investment in (FS)
flex-fuel
technology 1992 1992
begins Delphi involved in flex-fuel Targeted development of flex-
—
technology with GM and Bosch fuel solutions for Brazil begins

1998 1999 1994

Started an informal R&D At the same time, the A prototype for injection
Software (SW)
project Piracicaba research center is control software is created
created
2002 2001 1998
Volkswagen deal closed in The GM flex-fuel project Volkswagen requests Bosch
June, with Software Flexfuel officially began here, with two input on the deployment of a
Sensor technology parallel suppliers – Bosch and flex-fuel solution for VW
Delphi vehicles. Bosch had two
First order of flex-fuel technology options ready: an oxygen
sensor-based one and a lambda
probe-based one. The latter, in
development since 1988, was
recommended

March 2003 June 2003 September 2003

Market launch of flex-fuel vehicle Gol (VW) Corsa 1.8 (GM) Polo (VW)
1st 2nd 3rd

Launch of Flex-Fuel Vehicle

FS U.S. --> Brazil --> SAE Paper VW Order September (VW Polo)
BOSCH
SW
FS U.S. --> June (Corsa 1.8)
DELPHI
SW Brazil --> GM Order
FS March (VW Gol)
M.MARELLI
SW VW Order
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2003

Figure 2 – Summary of the race for flex-fuel technology

Bosch was notably the first company to invest in the
development of flex-fuel system, first in the U.S. (1988) and
later in Brazil (1992); however, its efforts were focused on a
capacitive fuel sensor (FS)-based solution. In 1994, a team of
Bosch engineers published an SAE paper [3] and publicly
disclosed the knowledge of the possibility of software-based
fuel detection (SW), finding it inferior to the hardware-based
solution. Bosch was the first “tier 1 supplier” to receive an
order for flex-fuel systems from an automaker – Volkswagen,
in 1998 – but, due to their inflexibility regarding use of the
fuel sensor-based solution, it was actually the last supplier to
have its product deployed in a commercially available
vehicle: the VW Polo, in September 2003 – with a software-
based solution.
Delphi also began its road to flex-fuel system
development in the United States, with a fuel sensor based
solution, in 1995. The company’s Brazilian unit, however,
began development focused exclusively on a software-based
solution, in 1999, the same year it opened its technical center
in Piracicaba. In 2001 Delphi received its first order from
GM, and its flex-fuel solution was deployed in a commercial
vehicle – the 1.8-liter Corsa – in June 2003. Last but not
least, Magneti Marelli took an altogether different path to
flex-fuel technology. MM had no prior knowledge of the
capacitive sensor-based solution; its efforts began directly
towards a software-based solution, in 1994, the same year
Castro, Koster and Franieck published their landmark paper.
While MM was the last supplier to receive an order for its
flex-fuel system – in 2002, from Volkswagen – the system
was deployed in Brazil’s first commercially available flex-
fuel car: the VW Gol Flex, launched in March 2003.
VI. THE BOSCH CASE IN THE LIGHT OF RELEVANT
THEORIES ON TECHNOLOGICAL INNOVATION
Evidence collected in nine interviews with distinct actors
in the auto sector shows that the development of flex-fuel
technology at Bosch was mostly characterized by inertia in
recognizing a new technology. In analyzing these
characteristics vis-a-vis the evidence of Bosch competitors

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 PICMET 2010 Proceedings, July 18-22, Phuket, Thailand © 2010 PICMET
Delphi and Magneti Marelli, we thought it pertinent to
employ the theories of Hill & Rothaermel [10] and Cohen &
Levinthal [4].
Hill & Rothaermel [10] describe a few aspects occurring
in the innovation process of large, firmly established
organizations, termed incumbent firms. In the case of flex-
fuel technology development, Bosch may therefore be
considered an incumbent firm. Their theory deals with five
factors in depth: technological innovation, organization
factors, strategic factors, innovative performance, and
inflexibility. According to their theory, incumbent firms
prioritize incremental innovations – those based on
improvement of existing products or processes through use of
existing technology. This prioritizing eventually weakens and
hampers the processes that would originate radical, or
breakthrough innovations – those that “break” a product
concept, bringing a new product based on new technology.
Also according to this theory, difficulty in dealing with
radical innovation often arises from a failure to recognize
new technology, which leads the company to bet on
previously known technology instead. In an example of this
aspect, Bosch promoted incremental innovation in fuel
injection systems since 1952, yet it was unable to get its
technological alternative accepted through radical innovation.
Due to the large internal structure of incumbent firms,
information is slow to reach its final destination, which
delays decision making. In many cases, decisions are made
exclusively by the company’s “top brass”, with no
participation from middle management. This may have
negative consequences, as middle managers are closer to the
innovation environment, and are often more familiar with the
details of processes. Top-management decision-making may
also lead to delays in detecting and accepting the entry of
new technology, as abandoning an existing technology that
has already received investment in favor of a new one may
come across as a management failure. The main difficulty
imposed by organizational factors in incumbent firms is
therefore inertia in decision making. In the Bosch case,
know-how for the development of fuel injection technology
was centralized in Germany, the company believed its
capacitive sensor-based solution was technically superior,
and non-technical factors – such as the total cost of the
injection system – played a lesser role in decision making.
These characteristics directly led to the company losing its
position as a pioneer in the launch of flex-fuel injection
technology to Magneti Marelli. It is important to note that
Bosch’s capacitive sensor-based flex-fuel solution was highly
successful in the U.S. market, which probably influenced the
company’s inflexibility regarding acceptance of the software-
based alternative witn lambda sensor.
As for strategic factors, Hill and Rothaermel’s theory
considers that incumbent firms have an edge due to the
ownership of sufficient resources at their disposal to adapt to
radical innovation. Incumbent firms are able to quickly
establish themselves in the supply network, adapting their
products and thus participating in the market. Another tool
1257
made possible by the availability of financial resources is the
acquisition of new entrants. These firms also tend to be quick
in adapting to new policies or changes in legislation, perhaps
due to their connections with political power centers. Bosch
features these characteristics. Bosch showed its innovation
strategy and approach to technological alternatives through
patente PI 8807885 (of 1988) and SAE paper 942400E
(1994). In the late 1990s and early 2000s, during the
development of flex-fuel injection, Bosch still had no
Competence Center in Brazil and had quite a limited R&D
structure in the country. However, after missing out on
pioneering the launch of a flex-fuel solution, Bosch quickly
bounced back and even improved flex-fuel technology, as
suggested by Hill & Rothaermel [10]. Although incumbent
firms more easily develop incremental innovation, Hill and
Rothaermel claim that they also invest in acquiring basic
knowledge of emerging technologies. If the technology
achieves dominance, this knowledge will quickly become
important, and will ease the company into rapid market entry.
According to Cohen and Levinthal [4], the capacity to
absorb a new technology depends on the technical path
followed by the organization, that is, if the company has prior
knowledge of the basic technical factors of the new
technology, it will have less difficulty adopting the
technology. According to Hill and Rothaermel [10], in
addition to investment in basic research, there is also some
investment in the development of radical innovation,
although this is generally not the main focus. In the Bosch
case, its Brazilian subsidiary probably was unable to
overcome the inertia of its German headquarters’
organizational structure due to its relative weaker power
position in the 90s (as contrated with Magneti Marelli
Brasil)..
Hill & Rothaermel [10] raise a hypothesis that may
explain why incumbent firms do not focus on radical
innovation. According to the authors, the inflexibility of these
firms is due to a fear that their products may be cannibalized,
as radical innovation may shrink or even destroy a market
currently dominated by the incumbent firm. We found that,
during the 90s, the Brazilian subsidiary of Bosch had no
decision-making autonomy on matters concerning flex-fuel
development, which was based on the solution found for the
U.S. market - the capacitive sensor-based solution, and is
highly inflexible when it comes to adopting new
technologies. According to this theory, one of the main
factors hampering the development of radical innovation by
incumbent firms is their slow perception and adoption of new
technology. Although these companies prioritize incremental
innovation, it is paramount that they pay attention to the
market and to emerging technologies.
Cohen & Levinthal [4] propose that absorptive capacity
depends on the technical “path” traveled by the firm; the use
of R&D activities to improve absorptive capacity, create new
knowledge, increase ease of learning, and improve
opportunities for technological innovation; that companies
must turn new information into knowledge and develop new
 PICMET 2010 Proceedings, July 18-22, Phuket, Thailand © 2010 PICMET
competences that can be applied to innovation; that
overlapping product development cycles ease communication
and coordination between subunits; and that companies
cannot afford to be locked out of the market due to delay in
adopting a new technology. Bosch had been investing in the
development of fuel injection technology for over 20 years
and introduced capacitive sensor-based flex-fuel technology
in the USA. These investments, mostly made with the North
American and European markets in mind, may have induced
the company to insist on the capacitive sensor-based solution
to Brazilian automakers instead of the software-based one.
This process led to its technological architecture being passed
over despite years of investment.
To Cohen & Levinthal [4], the concept of “absorptive
capacity”, in which companies must turn new information
into knowledge and develop new competences that can be
applied to technological innovation in order to avoid delays
in identifying key technology and being locked out of the
market, can also be ported to the Bosch case. This is due to
the fact that Bosch has had a technology and product
innovation strategy in place since 1952, in which innovation
occurs in an incremental manner. At the time of flex-fuel
technology development, Bosch’s product development
process was centralized at the company’s German
headquarters. Although Bosch is path-dependent, that is, it
has a prior history of technological development that
contributes to its absorptive capacity, it could not overcome
the inertia of its headquarters’ organizational structure when
it came to choosing the best architecture for flex-fuel
technology to be deployed in Brazil.
Another theory relevant to the Bosch case was developed
by Suarez [22], who constructed an integrative model to
analyze the process whereby technical alternatives “battle”
for technological dominance. According to the author, the
joint action of internal factors (technological superiority,
assets and credibility, size of installed base, and strategic
maneuvering) and external factors (regulation and
institutional intervention, switching costs and network
effects, regime of appropriability, and characteristics of the
technological field) directly influence the results of
competition for technological dominance. Suarez [22]
concludes that the outcome of this battle for dominance is a
complex inter-relatedness between external factors and
managerial decisions that influence clients’ choice. Evidence
collected during our interviews allowed analysis of the Bosch
case according to the framework of internal and external
factors proposed by [22].
Internal factors - Bosch had technological superiority, as
it has always invested in innovation and was technologically
ready before its competitors were. As for credibility and
installed base, Bosch led the components marked and made
significant investments towards technological development of
the electronic fuel injection system and plants and
technological training centers worldwide. Regarding strategic
maneuvers, Bosch was clearly one of pioneers of flex-fuel
technology development in the world, particularly in the U.S.
1258
market, using its capacitive sensor-based solution. One of the
risks of being a first mover, as noted by [22], is being stuck to
a technological alternative that is not consistent with the
needs of the market. Bosch’s high degree of openness
regarding its knowledge, as evidenced by patent PI8807885
and SAE paper SAE-942400E [3], may have facilitated
competitors’ technological development. Furthermore, the
centralization of decision-making at Bosch’s German
headquarters may have contributed to the inertia in
recognizing software-based flex-fuel technlonogy as the most
adequate solution for the Brazilian market.
External factors - the Brazilian automotive sector, as that
of many other countries, is characterized by extensive
exchange of technical information between automakers and
their suppliers. The flow of knowledge between companies
during the development of flex-fuel systems was analyzed by
Yu, Nascimento and other researchers [27, 28, 29], and found
to be a relevant factor in explaining the relatively short lag
between tier 1 suppliers in launching their flex-fuel systems,
since the development lead time of these systems can be as
long as two years. Another characteristic of the auto sector is
the high degree of globalization among automakers and
suppliers; typically, the Brazilian subsidiaries of these
companies have little influence, particularly where it comes
to technology [7]. The exception concerns ethanol technology
where there is a large degree of autonomy, due to its large
local and small international relevance. The commercial and
technological relationships between automakers and suppliers
form worldwide networks, which significantly affect the
aforementioned internal factors, particularly switching costs.
Our preliminary comparative analysis shows that,
apparently, the main factor that kept Bosch from being a
pioneer in commercially deployed flex-fuel solutions despite
having been the earliest supplier to develop flex-fuel
technology was its delay in recognizing the software-based
alternative. This delay was caused by Bosch’s inflexible
approach of basing its decisions essentially on technical
factors.
Final considerations
Brazil was not the only country to pursue the adoption of
flex-fuel vehicles as a means of encouraging the use of
ethanol fuel. France, Canada, Sweden, and other countries are
engaged in this initiative, and companies including Bosch,
Delphi, Magneti Marelli, and several others seek to meet the
demands of these markets. In the emerging Brazilian auto
market, vehicles must be low-cost if they are to reach any
significant sales volume; this was the main factor making the
capacitive sensor-based flex-fuel solution inadequate. At the
corporate level, we believe there was an internal conflict
during product development at Bosch. On the one hand, the
success of Bosch’s hardware-based flex-fuel technology in
the U.S. market suggested the possibility of a single
worldwide flex-fuel solution; on the other hand, the Brazilian
market – one of the world’s top ten – called for a lower-cost
solution. As Bosch Brasil’s flex-fuel project had to compete
 PICMET 2010 Proceedings, July 18-22, Phuket, Thailand © 2010 PICMET
for resources with other Bosch NPD projects from around the
world, this issue warrants further exploration, which could
provide new insight into Bosch’s capacity to recognize
emerging technology, complementing the findings of the
present study. Interestingly, the success of flex-fuel
technology development in Brazil increased the standing and
technological influence of the local engineering team within
the Bosch group; Brazil was elevated to the level of center of
competence in bi-fuel (ethanol/diesel) technology
development. Similar facts happened at Delphi, Magneti
Marelli, and the Brazilian unit of GM.
Another explanatory hypothesis concerns Bosch’s
worldwide supply network, due to the size of the group and
its chain of relationships, Bosch may have chosen to insist on
the capacitive sensor-based solution in order to avoid
jeopardizing established relationships with suppliers and
partners, whether in Brazil or the U.S. This issue also
requires further, in-depth analysis.
Finally, there is the issue of business performance and
results as affected by Bosch being slow to recognize
software-based flex-fuel technology. By late 2008, the flex-
fuel systems market was led by three companies: Magneti
Marelli had a 49% share of the market, while Bosch had 24%
and Delphi, 18%. A more in-depth, specific analysis is
necessary to identify whether there is any correlation between
Bosch’s relatively slow entry into the market and market
share or any other business performance indicators.
VII. CONCLUSIONS
The large-scale adoption of flex-fule vehicles (those
capable of running on gasoline and/or ethanol and any
mixture thereof) in Brazil began in 2003, and in five years the
country’s flex-fuel fleet reached 6 million vehicles (23% of
total). At the time of writing, 95% of new cars manufactured
in the country have flex-fuel technology. Fuel detection and
engine control technology are determining factors for the
development of a flex-fuel vehicle. The present study
therefore sought to identify and analyze the aspects that
influenced the process of flex-fuel technology development at
Bosch.
From a methodological standpoint, our study was
qualitative, and descriptive in nature, carried out through the
case study method. We interviewed leaders of electronic fuel
injection system manufacturers (Delphi, Bosch, and Magneti
Marelli), automakers (GM and VW), and related trade entities
(AEA and UNICA), providing a chronological description of
the key facts and technological pathways that led to the
commercialization of flex-fuel vehicles. The present study
contributes to understanding the technological aspects of
emerging flex-fuel technological solutions in Brazil,
enriching the perspective of previous studies, such as [12,
21], that analyzed the phenomenum based on data from a
single company (Magneti Marelli and Volkswagen
respectively). Despite over 20 years on investment in the
development of a flex-fuel injection system, Bosch’s
1259
hardware-based capacitive sensor solution was rejected by
automakers, which adopted software-based solutions
provided by Bosch competitors instead. The present study
suggests that this process may have been the consequence of
technological inertia in Bosch initiatives, which may be better
understood in light of absorptive capacity theory, and also
due to internal and external factors of competition between
incumbent firms and new entrants.
This study contributes to the understanding of the
development of emerging technologies through an analysis of
the singular phenomenon of flex-fuel vehicle adoption in
Brazil. Our research was supported by a wealth of data
collected from multiple informants, analyzed in light of the
academic literature, and finally suggesting new lines of
research.
VIII. STUDY LIMITATIONS
In addition to the limitations inherent to our research
method of choice, this study has some other limitations that
bear noting. Collection of data from multiple informants
provided more comprehensiveness and improved
corroboration of certain facts, but we also received
conflicting reports from competing manufacturers of flex-fuel
systems. Interviews with “neutral” entities and the technical
literature (mostly SAE publications) assisted us in during the
data analysis phase, and supported weekly debated between
faculty and students during the four-month study period. We
must, however, consider the presence of interpretive bias and
also of informant bias, as interviewees were aware of the fact
that their competitors were also being interviewed for the
study.
IX. FUTURE RESEARCH DIRECTIONS
The battle field in flex-fuel technology is not finished,
moreover it is increasing in Brazil. In 2009 two major
developments were launched: the first flex-fuel motorcycle,
and the first flex-fuel injection system for cars capable to start
at any temperature using E100. The same companies
mentioned in this study are competing in these new products.
An interesting direction for future research is to investigate
how these companies are recognizing – or not – opportunities
and threats, and how the dispute between different
technological alternatives occurs in this market. “Real-time”
analysis of this technological battle would permit more in-
depth analysis of the decisions inherent to recognition. It
would also be interesting to consider the economic impacts of
these decisions in terms of the market share of each tier 1
supplier and how the new competitive scenario will take
shape in the presence of emerging technology. A more
generic research theme would be analyzing the efficacy of
processes used in the auto sector to monitor the emergence of
new technology, and how this knowledge is assimilated by
companies (absorptive capacity) [4]. These research venue
could also bring some light to the role of dominant design
 PICMET 2010 Proceedings, July 18-22, Phuket, Thailand © 2010 PICMET
and industry standards on technological battles, and economic
consequences for firms and industry [30].
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