Conditions of Lead Markets Existence

The significance of a lead market is that innovation designs adopted in one market will later be adopted by other markets as well. Until now, I have outlined the definitions of the theoretical mechanisms of the internationalisation of innovations and the market-specific characteristics that facilitate these mechanisms. The lead market theory does not suggest that lead markets exist for all internationally successful innovations. In reviewing the arguments presented in this chapter, I will summarise conditions that make it more possible for a lead market phenomenon of an innovation to emerge. 

The existence of lead markets requires that the stimuli of adoption of innovatic ns vary internationally. In the theoretical consumption model the stimuli included the preferences, the prices of different designs and the income. The likelihood of a lead market existing therefore increases with the international variety of demand preferences and market conditions. If the stimuli of adoption vary internationally, countries prefer different innovation designs. If the stimuli were equal from coim-try to country, there would be a globally interspersed pattern of adoption of innovations no regional market would actually lead the international adoption of an innovation. 

Finally, lead markets are more prominent in markets with more technical opportunities. It was suggested that the industry life cycle, as outlined above (2.4), does not exist for industries if there are no rich opportunities for innovations (see Tether and Storey 1998, p. 949 for a review). In industries with low technical opportunities the main problem for a firm is how to generate innovations. There are not that many innovations and innovation designs competing. 

This thesis will proceed with a case study on the cellular mobile telephone industry. The case study is intended to further assess the applicability of the system of lead market factors derived in this chapter. Chapter 5 will address the question of how multinational firms can use the lead market concept to generate global innovations. 

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