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Lead Markets, Innovation Differentials and Growth

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  • Marian Beise

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

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    Abstract

    This article suggests that the specialization of countries in the in-ternational trade is determined by the lead-lag market pattern of national mar-kets. Many internationally successful innovations have been adopted first in one country while other countries initially either preferred other designs or an estab-lished product. A model for the international diffusion of innovations is presented in which nationally preferred innovation designs compete to become a globally dominant design. In this model, there are country-specific market attributes that increase the likelihood that the choice a country makes among alternative tech-nologies is adopted around the world. It is argued that technological knowledge gaps are not the origin of an international competitive advantage. Instead, a country gains a competitive advantage because a specific innovation design was adopted earlier than in any other country. This gives local firms a head start in producing, gather marketing intelligence and securing the property rights of a globally successful innovation. In countries with lag market characteristics, do-mestic innovations are less likely to get adopted worldwide. They often switch from a domestic innovation design to a foreign innovation design, which increases imports. The lead-lag market explanation of trade specialization has implications for national policies. In this model domestic innovations do not always foster ex-ports; idiosyncratic innovations induced by lag market contexts can hamper the export chances of local firms and in the end lead to an increase in imports. It is suggested that in order to increase exports, national policies have to distinguish between a domestic lead and lag market context in each industry. While in a lead market context, traditional policy instruments that enhance the rate of innova-tions are effective, in a lag market situation national follower strategies are more appropriate.

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    File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp157.pdf
    File Function: First version, 2004
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    Bibliographic Info

    Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 157.

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    Length: 27 pages
    Date of creation: Apr 2004
    Date of revision:
    Handle: RePEc:kob:dpaper:157

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    Related research

    Keywords: Competing Technologies; International Diffusion of innovation;

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Marian Beise, 2004. "The International Adoption of Photovoltaic Energy Conversion Is Japan a Lead Market?," Discussion Paper Series 153, Research Institute for Economics & Business Administration, Kobe University.
    2. Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-71, September.
    3. Keller, Wolfgang, 1996. "Absorptive capacity: On the creation and acquisition of technology in development," Journal of Development Economics, Elsevier, vol. 49(1), pages 199-227, April.
    4. Rennings, Klaus & Beise, Marian, 2003. "Lead Markets of Environmental Innovations: A Framework for Innovation and Environmental Economics," ZEW Discussion Papers 03-01, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Timothy F. Bresnahan & Franco Malerba, 1997. "Industrial Dynamics and the Evolution of Firms' and Nations' Competitive Capabilities in the World Computer Industry," Working Papers 97030, Stanford University, Department of Economics.
    6. Aitken, B. & Hanson, G.H. & Harrison, A.E., 1994. "Spillovers, Foreign Investment and Export Behavior," Papers 95-06, Columbia - Graduate School of Business.
    7. Fagerberg, Jan, 1995. "User-Producer Interaction, Learning and Comparative Advantage," Cambridge Journal of Economics, Oxford University Press, vol. 19(1), pages 243-56, February.
    8. Gruner, Kjell E. & Homburg, Christian, 2000. "Does Customer Interaction Enhance New Product Success?," Journal of Business Research, Elsevier, vol. 49(1), pages 1-14, July.
    9. Vernon, Raymond, 1979. "The Product Cycle Hypothesis in a New International Environment," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 41(4), pages 255-67, November.
    10. Dekimpe, M.G. & Parker, P.M. & Sarvary, M., 1997. ""Globalization": Modeling Technology Adoption Timing Across Countries," INSEAD 97/75, INSEAD, Centre for the Management of Environmental Resources. The European Institute of Business Administration..
    11. Paul Klemperer, 1987. "The Competitiveness of Markets with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 138-150, Spring.
    12. Bronwyn H. Hall, 2004. "Innovation and Diffusion," NBER Working Papers 10212, National Bureau of Economic Research, Inc.
    13. Nicholas Economides & Charles Himmelberg, 1995. "Critical Mass and Network Size with Application to the US Fax Market," Working Papers 95-11, New York University, Leonard N. Stern School of Business, Department of Economics.
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