Identifying lead markets for the international banknote production industry

This paper contributes to theoretical study of innovation diffusion by exploring a role of lead markets factor for innovation adoption at international markets of products and technologies for national security. The study is based on data obtained from analysis of innovations in banknote production industry. The international banknote industry characterized by limited number of buyers (monopsony) and suppliers (oligopoly) is an example of highly innovative sector with important national security task to maintain integrity of currency circulation. It is a truly global industry focused on constant development of new security technologies adopted by most of the central banks. Our findings suggest the factor of lead market is one of the key elements in taking decision by the central bank to adapt certain security features and technologies for their banknotes. Geographical origination of a particular technology is been put aside when issue of national security is in place. Only the value of an innovation itself matters. We argue that lead market factor is a specific characteristic for of innovation diffusion in this sector that should be common for areas where government institutions act as single buyer when the supply is scarce i.e., military industry, space sector, some pharmaceutical markets etc.