Lead markets: country-specific drivers of the global diffusion of innovations

Abstract

Globally successful innovations have commonly been preferred first in one country or region before being adopted internationally. Countries that first adopt an internally successful innovation can be described as lead markets. This paper presents the lead market concept of developing global innovations. The lead role of a market is discussed first theoretically and then by use of a system of five country-specific factors: demand advantages, price advantages, export advantages, transfer advantages and market structure advantages. The applicability of this system of lead market factors is then evaluated in a detailed case study of the cellular mobile telephone industry. It is finally suggested that companies can harness lead markets for the development of global innovations. By developing and refining innovations in close interaction with the local environment of a lead market, a company can focus on a narrow range of preferences and feedback, lowering the risk of being locked into idiosyncratic environments, and generate true global innovations. A method for identifying potential lead markets is briefly discussed.