Lead Market Factors

Price advantage. Conditions that result either in relative price decreases of a nationally preferred innovation design compared to designs preferred in foreign markets or in anticipation of international factor price changes. 

Demand advantage. Conditions that result in the anticipation of the benefit of an innovation designs emerging at a global level. 

Transfer advantage. Conditions that increase the perceived benefit of a nationally preferred innovation design for foreign countries or by which national demand conditions are actively transferred abroad. 

Export advantage. Conditions that support the inclusion of foreign demand preferences in nationally preferred innovation designs. 

Market structure advantage. Conditions that increase the level of competition between domestic firms and facilitate low market entry barriers for new firms. 

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To identify lead markets for hydrogen and fuel cells, a holistic approach is chosen which takes supply- and demand-side factors into account as well as regulative impacts. Quantification of lead market factors is often not possible (e.g., how are technology capabilities or transfer advantages measurable ). 

The thesis follows the traditional structure of analysis analysis of existence of lead markets, analysis of contingency of lead markets and analysis of efficiency of lead markets. The hypothesis of existence is that there are lead markets for a broad range of innovations. The hypothesis of contingency is that several systematic nation-specific demand and market conditions can be identified that facilitate the international diffusion of innovation designs domestically preferred. These are combined in five lead market factors. The hypothesis of efficiency is that multinational firms can promote the global success of their innovations in concentrating the innovation development activities in the respective lead markets. 

For the economic analysis of lead markets it is important to distinguish between the lead effects of markets themselves and features of markets which support the lead function of a country. The lead or leverage effect is a mechanism by which a design adopted by the lead market supersedes initially preferred alternative designs in lag markets and becomes the globally dominant design. In chapter 3 the basic lead mechanisms will be outlined first theoretically. These mechanisms and the variety of factors supporting these mechanisms will be refined into a system of lead market factors for better practicability. 

Each group is not necessarily uni-dimensional because each collects a multitude of sub-factors that could be unrelated or even contrasting. These sub-factors are detailed in the following section. The section shows that the lead factors of national markets depend on the economic, social, political, cultural and ecological systems of a nation. In section 3.3.3. I briefly address the influence of a nation s systems on its lead market role. Figure 3-9 depicts the determinants of the complete lead market system. Like the determinants in Porter s diamond, the lead factors interact with each other and with other factors. The relationships between the lead market factors are discussed in section 3.3.1. 

Figure 3-9 Overview of lead market factors and related factors of national competitiveness...

Figure 3-9 includes some of the other factors that are not lead markets factors, but either support the lead market factors or they are the result of the lead market role of a market. For instance, supporting and related industries that are internationally competitive can support the export advantage and therefore the lead nuir-ket role of a country in an industry. Factor endowments such as physical resourc es and availability of capital can influence the lead market factors such as the factor price advantage. The availability of financial resources, sources of technical and market knowledge, can support the lead market factors, but they are mainly considered a result of the early adoption of an innovation by a market. In section 33 in particular I address the question of how national technical superiority is related to the lead market role of countries. Finally, chance is a determinant of many processes in the economy. As mentioned above (2.4), in models of technical choice under externalities historical accidents are considered mainly responsible for the outcome. Chance controls a basic invention based on serendipity (inven-tions-by-chance) and oil price shocks, war and political shifts. It can be expected that chance may play a role in the lead market processes as well. The lead market system is therefore not a deterministic theory. However, this thesis is predominantly about nation-specific attributes or national success factors that support the lead market function of a country as well. In this chapter I will describe these nation-specific lead factors. 

The price-lowering effect of user competence is an argument that shows that Levitt s (1983) low-price argument, incorporated in the price advantage as a lead market factor, is not basically opposed to the sophistication of demand argument. Levitt s low-price argument, however, seems more applicable to products... 

The five factors that constitute a lead market are interrelated. They form a system such as the factors in Porter s diamond of national competitive advantage. Most of the relationships between the factors are mutually reinforcing. In practise tliis means that often no single factor constitutes a lead market alone but rather a mixture of interdependent lead market factors. In this section I will discuss the relationships between the five lead factor advantages. 

Overall, the discussion leads to the conclusion that the system of lead market factors is mainly consistent. Most lead market factors reinforce each other with certain exceptions. 

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. 

In this case study, four hypotheses shall be supported. First, that mobile telephony is a lead market phenomenon. Second, that the lead market can be differentiated by the lead market factors derived in the first chapter. Third, that the firms located or having their headquarters in the lead market became internationally conq)eti-tive. Fourth, that the lead market could have been identified before the mobile telephony industry emerged as a mass market in the early 1990s. 

The methodology followed here is based on the lead market concept elaborated on earlier. The study is an international comparison of lead market factors for the case of mobile telephony. It is examined whether the rank of adoption of the dominant design in mobile telephony is correlated with the degree of markedness of the lead market factors. For some lead market factors quantitative indicators could be found, for other factors the international comparison has to be qualitative. In addition, the roles of supply factors for the international diffusion of mobile telephony, such as technological knowledge leads and suppliers, are discussed. 

Before I elaborate on the lead market factors that were responsible for the successful international diffusion, I shall briefly review the history of mobile telephony. Three distinct periods in which the usage of mobile communication fundamentally changed can be identified the period of pre-cellular telephony, of analog cellular and of digital cellular mobile telephony. 

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