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Managing technical changes from the scales of legal regulation: German clean cars against the European pollutant emissions regulations in the 1980s

ABSTRACT In this paper, we analyze how public regulators and regulated businesses interpreted and influenced legal change implying technological shift. Based on the economics literature on technical change and legal history literature, we provide a constructivist and systematic framework to analyze law as mediation between regulators and firms’ respective behaviors. The analyzed historical case deals with the attempt of automobile multinationals to shape the European Economic Community vehicle emissions regulations. It focuses on the German fiscal policy to promote the sale of the so-called Clean Cars during the mid-1980s. We concluded that the regulation proposed by European Commission in the field of competition and environmental protection law successfully solved the clash between legitimate goals around emissions regulations. It covers implication in terms of normative order; political objectives coherency; firms’ profit strategies and relationships between firms and regulators through European trade associations. We find that the key factor of the firms’ positions to the law lies in information exchanged with political institutions, whose legal regulation acts as a signal integrated into the long-term firms’ strategies.