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Lead Market Research

Adjusting to Changing & Emerging Ground Realities

[ Dr. Rajnish Tiwari and Prof. Dr. Cornelius Herstatt ]

"Lead Markets" are generally defined in academic literature as countreis that pioneer the adoption of an innovation design and that, therewith, set off an important signal to other global markets about the utility and desirability of that specific product design (see Lead market page at Wikipedia for some useful links to academic research). Known examples of existing lead markets include Germany for automobiles, Japan for fax machines, and USA for Internet-related applications. A lead market is endowed with ceratin advantage factors, which enable this signaling function to other markets. The concept of "lead markets" has gained increasing relevance in the theory and practice of innovation management as they are thought to help reduce technology and market uncertainty of innovation projects. Lead markets are thus important drivers for globalization of innovation ("global innovation").

Even as this concept has increasingly gained currency especially in the European Union countries, lead markets have been defined by factors such as high per-capita income, a high level of customer "sophistication", and world-class physical & institutional infrastructure. Not surprisngly, all known examples of lead markets in published academic literature are concentrated in a few developed economies. As a consequence, technological capabalities of lead market nations have been thought to be only of secondary imporrance as all such markets are presumed to either already possess or in a position to acquire required technological capabalities in a given technological field. The research so far, has tended to identify lead markets based on an ex post analysis from a macro-economic perspective.

Under the aegis of Research Project Global Innovation we have sought to update/extend this theoretical model in order to better reflect the changed (and changing) ground realities in a globalized world by questioning the conventional wisdom and taking a re-look at the dominant logic. We have examined the avenues for extending this model to developing economies that account for a constantly increasing share of global economic and technological output. Our research shows that lead markets can also emerge in a developing economy if (a) the market size ("volume") is large enough to offset the disadvantages of a low per-capita income; and (b) the country is endowed with sufficient technological capabilities. Technological capabilities can be supplemented, but not entirely substituted, by access to "Open Global Innovation Networks" (OGINs). Such a lead market can have regional and/or global signaling function, for that the extent of its embeddedness in the international trade is a crucial factor. In this respect, national and sectoral systems of innovation in the host country seem to play a decisive role as enabling contextual factors.

Based on our examination of the "small car" segment of India's automobile industry we have identified an emergence process for a prospective lead market, which can potentially help in ex ante identification of a prospectice lead market. Ou research identifies the need for, and mechanisms to, bring (back) the lead market approach to the realm of business management away from a purely macro-economic perspective. We therefore define lead markets as:

"A lead market is a national market, which primarily on account of the size of its domestic demand, its access to technological capabilities, and its embeddedness in the global economy provides key innovation impetus to a particular category of products" (Tiwari, 2013: 200).

Our research has led to identification of advantage factors that are significantly different (at least in the context of emerging economies) than the ones proposed in the original model. We are continuosly engaged in this research to deepen our understanding of lead markets and to work out the implications of the changed and changing scenarios from firms' and policy makers' perspectives.

At present, there are two studies currently underway within this stream of research at our institute to further ascertain the validity of our findings:

  • Early Identification of Emerging Lead Markets: An Examination of Selecting Automobile Markets in Developing Economies

  • Two-wheeler Industry in India: Signs of Lead Market Tendencies?

Some of our publications based on studies already completed and with a direct relevance to this theme are listed below:


[ For any enquiries, please contact: Dr. Rajnish Tiwari ]