Lead markets, international business and frugal innovation

Lead markets play a key role in innovation strategies of multinational enterprises and help firms develop dominant designs with higher probability to succeed internationally. Traditionally, lead markets existed in economically developed countries, but recent years have seen emergence of lead markets in the rapidly growing economies of the Global South, such as China and India. This chapter discusses the potential role of lead markets in the context of frugal products and services that are increasingly demanded globally. With the help of two case studies, we show that firms can benefit from simultaneously engaging in the relevant conventional and emergent lead markets. While generating innovation impulses in emergent lead markets is key to ensuring context-specificity of frugal solutions, advanced innovation ecosystems in conventional lead markets can enable technological excellence and reduce negative country-of-origin effects. Collaborative effort can lead to “affordable excellence”, which is crucial for the long-term success of frugal innovation.