The System of Lead Market Factors

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. 

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. 

The analysis of lead market attributes is only part of the system of the competitiveness of nations and therefore of locations for R D activities of multinational firms. I do not offer a comprehensive understanding of the system as a whole, only one (vital) element. The way multinational firms build their strategies and make the decisions required, however, depends on the evaluation of the entire system. This complex task cannot be accoiiq)lished by a single thesis. My task was to deepen the understanding of a part of Porter s diamond, the demand side factor, which in my view is underestimated in terms of its significance and has been less frequently studied than the other parts, which are nevertheless important, too. 

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 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 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. 

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