Local 'Test Bed' Market Demand in the Transition to Leadership: The Case of the Korean Mobile Handset Industry

This article proposes that a potentially significant dimension of technological catching-up and the transition to leadership lies in the quality and dynamics of the local market, rather than in the export market demand as traditionally stressed in catch up studies. Based on an exploratory analysis of the Korean mobile handset industry over the period of the late 1980s to 2005 the paper shows that a transition to leadership in handsets was shaped and driven by domestic users, local service suppliers (mobile telecommunications operators), favorable government policies, and strong producer-user links forged by manufacturers and operators. Traditionally, local demand in latecomer economies has been considered too small and unsophisticated to stimulate innovation and to enable catching up. However, in this case, local demand evolved and acted as an important “test bed” for new products, services, and technologies, shaping the rate and direction of the technological development of both local suppliers and operators. The conclusion argues that while direct implications for other developing countries cannot be drawn from a single case, future research could identify whether, under certain circumstances, the role of local demand and test bed markets could have wider relevance for other advanced developing nations and other sectors approaching the technology frontier.