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With flexible fuel technology, customers can choose among gasoline, ethanol, or any mix thereof at the fuel station pump. This paper presents the endogenous and exogenous factors that influnced the development of a flexible fuel electronic injection system by Magneti Marelli Automotive Systems Brazil – the first to the market. This software-based technological architecture, launched commercially in 2003, is now the dominant flexfuel design in the Brazilian market. This article documents the emergence of a local dominant technology (design) in a specific car sub-system. It is shown how exogenous institutional factors played the major role in this process. The paper describes how this local dominant technological design emerged through the sharing of capabilities and interaction among the key market players, in the absence of a strong appropriability regime. All the main market pioneers were multinational affiliates, inviting questions concerning this technology diffusion outside Brazil.