A Simple Model for Lead Markets

To support the existence of lead markets, one must clarify why a country adopts an innovation in the first place that subsequently becomes adopted globally or why a nation-specific innovation design becomes globally adopted and other nation-specific are abandoned. For a lead market concept to be viable in practise the theoretical discussion must be exhaustive because a firm must take all cases into consideration. As the model demonstrates, national markets can be lead markets for several reasons. In other words, a lead market theory is an eclectic theory like the theory of international production by Dunning (1979). The advantage of the theoretical model presented here is that all different lead effects can be demonstrated. 

Let us assume that the two products qj and q2 can be easily substituted and combined continuously within a country. It does not matter where the products sire produced, there are no transportation costs. The model should be focussed on the adoption process of an innovation competing against other innovation designs or against an established product. In this context the traditional consumer theory (the consumption of goods) and the Lancaster approach (the consumption of attribut( s) 

Consumers form their preferences for the two goods according to the properties they possess. The individual preferences of users determine the relative weights given to the various characteristics in making choices. Indifference curves of the collective consumption of users of one country for the two goods have the usual property of strict convexity and can hit axes, i.e. the products are not essential. The model assumes that both goods are offered in all countries. I confine the 

An innovation design can be induced by nation-specific demand either when the innovating firm knows user preferences, or when firms offer different versions of an innovation in the market and users select the version that is most suitable to their preferences. The model is therefore not limited to innovations actively demanded by users. 

An indifference curve is a group of combinations of goods with the same utility, so that any combination on the curve is preferred. In this context I understand preferences as an ordering of choices of goods according to a utility function (Deaton, Muellbauer 1982, p. 25). 

---

All the leading instrument manufacturers produce and market gas chromatographs. In addition, there are many smaller speciality companies who also manufacture and market GC units. Which instrument should be considered depends upon the use to which they are to be utilized, and this ultimately sets the criteria for purchase. GC units come in a variety of makes and models, from simple student instructional types, (e.g., Gow-Mac Instrument Co.) up to deluxe multicolumn, interchangeable detector types (e.g., Varian Instrument Division). So as not to infer recommendation for one particular company, the reader is referred to the Lab Guide issue of the Journal of Analytical Chemistry (41) for a listing of the instrument manufacturers. 

---