Management of Technology and Innovation in Japan

322 A. Gerybadze
some of these success stories have been explained through effective working of
lead markets. Mobile communication and the evolution of the GSM standard in
Scandinavia (Beise 2004), media and printing technology or automotive electronics
in Germany are examples, where European MNCs have become successful in
building on lead markets in their home country.
Similar to the differentiation between home-base augmenting and home-base
exploiting R&D outlined in section 3, we can describe two different strategies that
can be followed by MNCs, if lead markets drive innovation processes.
� Home-base exploiting lead market strategies build on demanding customers
and network embeddedness in the home country;
� foreign lead market strategies or home-base augmenting lead marketing are
more difficult to deal with, but are becoming increasingly important for MNCs.
The literature on transnational innovation (Bartlett and Ghoshal 1998) has emphasized
this new mode of leveraging innovation at distinct lead market locations.
MNCs are reported to develop learning and sensing capabilities, and some companies,
especially those from smaller countries, are particularly strong at this.
However, the majority of MNCs from Japan and from larger European countries
still encounter great difficulties when they have to deal with lead marketing in distinct
locations (Gerybadze and Reger 1999; Sölvell 2004). There are few examples,
of MNCs effectively implementing lead market innovation capabilities
abroad. Nokia has been quite strong in developing novel products and services in
Asia as well as in other European countries. Japanese firms (Sony, Matsushita) are
more and more often generating new product and service concepts in sophisticated
market environments in Europe, e.g. for automotive entertainment systems. However,
managing foreign lead markets requires new management concepts and a
new configuration of R&D and distributed teams within large MNCs. Apart from
few effective cases, though, this new mode of transnational innovation still represents
a great challenge for Japanese MNCs and European firms alike. 11
11 See Gerybadze (2004b) for an analysis of team-building mechanisms and communication
problems arising in transnational innovation.