Identifying lead markets for the international production industry 497 Российский журнал менеджмента Russian Management Journal 18 (4): 497–524 (2020) 18 (4): 497–524 (2020)

IDENTIFYING LEAD MARKETS FOR THE INTERNATIONAL BANKNOTE PRODUCTION INDUSTRY

G. V. KORNILOV Research Institute of Goznak, Russiaa

A. V. TRACHUK Higher School of Management, Financial University under the Government of the Russian Federation, Russiab

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 circulation. It is a truly global industry focused on constant development of new security technologies adopt- ed 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 . 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. Keywords: lead markets, banknote industry, national security, diffusion of innovations, cur- rency circulation. JEL: G21, H76, L69, O33.

Postal Addresses: a 19, Mytnaya Str., Research Institute of Goznak, , 115162, ; b 49, Leningradsky Pr., Higher School of Management, Financial University under the Government of the Russian Federation, Moscow, 125993, Russia. © G. Kornilov, A. Trachuk, 2020 https://doi.org/10.21638/spbu18.2020.402 498 G. V. Kornilov, A. V. Trachuk

Introduction features, as it will be shown in this study, is one of the most innovative branches of modern The development of an effective system printing. Increase of counterfeit banknotes in for searching, selecting and implementing circulation and subsequent loss of reliability innovations for national security is the subject (higher probability of receiving a counterfeit of a number of studies [Mowery, 2009; Gansler, banknote) may disorganize payment system 2016; Iles et al., 2017]. Such studies focus on as a whole and also undermine integrity of the role of state institutions in promoting the national currency [FATF, 2013]. innovative activity in socially or politically The global technological trend of digi- meaningful areas. One of the features of talization has influenced currency circula- the markets, where state institutions are tion. Recently the central banks of most the customers or final buyers, is that the of countries got themselves involved into number of players in such markets is often discussions on using Central Bank Digital limited. The situation is common, for example, (CBDC) that at some point of time for the public health sector [Kirkwood, should change payment landscape by elimi- 2016], the environmental protection [Jog, nating or supplementing presently existing Kosmopoulou, 2014], the national security payment instruments [Barrdear, Kumhof, and defence [Mahoney, 2017], and space 2016; Ketterer, 2016; Digital Ruble, 2020]. exploration [Szajnfarber, Richards, Weigel, However at present cash is still the most 2014], i.e. when it comes to products or preferred payment instrument globally and solutions that the state needs to provide the task of keeping its integrity by providing public or quasi-public goods and services to physical security is one of the main concerns its citizen. Many states realize cautious and of all issuing authorities. responsible strategy of procurement to ob- All states face similar challenges in the tain products that have already been tested sphere of currency circulation regardless of by some other consumers [Linton, 2018]. their economic situation and level of mac- Adopting innovative products and techno- roeconomic stability, since these risks are logies is an important condition for achieving largely technological in nature (degree of the state’s objectives: providing new oppor- development and level of penetration of cer- tunities to create public goods or reducing tain technologies, availability of specific ma- costs to create them, as well as implementing terials or their substitutes, etc.). However, ground-breaking projects earlier than in other not all the countries have a mature system countries improves infrastructure quality and, for developing and implementing innova- consequently, the country’s competitiveness tions designed to protect banknotes against and welfare of its people. Public procurement counterfeiting; moreover some countries do markets are typically dominated by a single not have the resources to produce their own buyer (monopsony) and very often by a limited banknotes. We assume that a mechanism number of sellers (oligopoly), which would for searching and selecting innovations in impose speciality on the innovation diffusion banknote industry ensuring that the bank- processes. notes produced are properly protected against There are also other, much less explored, counterfeiting and modernized in a timely spheres of state interests. Among these is manner to reflect technological changes and currency circulation. States (central banks) other external factors is already in place. spend more than US $10 bln annually on Certain geographical markets in differ- banknote production alone [Pizzanelli, 2011]. ent fields become the lead markets, that is, These expenditures include, inter alia, re- markets where the adoption of innovations search and development to protect bank- precedes their global diffusion [Beise, 2001]. notes against counterfeiting. Development We assume as in the case of consumer inno- of banknotes and anti-counterfeit security vation diffusion, when adopting an innova-

РЖМ 18 (4): 497–524 (2020) Identifying lead markets for the international banknote production industry 499 tion for use in banknote production, state dividuals [Rogers, 2003]. Later, this ap- institutions (or their authorized agents) are proach was widely used in research and guided by innovative solutions that have al- practice, and was developed in many other ready been introduced and proved their ef- studies in relation to different consumer fectiveness in other countries. markets. Further studies showed that be- In this paper, we examine the process fore an innovation is adopted, it is evalu- of innovations diffusion in solutions and ated in terms of price/benefit [Fliegel, products for national security applications Kivlin, 1966; Deffuant, Huet, Amblard, by using banknote production as an example. 2005; Franke, Von Hippel, Schreier, 2006; In doing so, we will attempt to prove the Hafeez, Hooi Keoy, Hanneman, 2006; Straub, hypothesis that there are also lead markets 2009]. However, the consumer’s decision for such solutions, where the adoption of to adopt an innovation is not based on innovations takes place before such innova- this evaluation only. Important factors in tive products and solutions become dominant the diffusion of innovation include the globally. On the one hand, the confirmation so-called “lead users” who are ahead of of this hypothesis will allow product develop- the market in terms of needs, motivation ers in such markets to choose a strategy that and qualifications [Urban, Von Hippel, focuses on the promotion of their products in 1988; Morrison, Roberts, Von Hippel, 2000; lead markets, and on the other hand, state Lüthje, Herstatt, 2004; Bilgram, Brem, institutions and central banks that purchase Voigt, 2008]. Lead users create an innova- such products and solutions would be able to tion diffusion environment. manage their resources more effectively. The The main characteristic of an innovation results should also be relevant to companies is that it must be significantly different from in sectors that focus on products and ser- existing products supplied by the company. vices consumed by governments or govern- The innovations could be categorized by nov- ment agencies for example medicine and in elty and market impact. The most common particular marketing of new vaccine. It will classification include incremental, radical allow them to focus their effort on specific and disruptive innovations. However other market saving investments and understand- types of innovations are identified by some ing that it will be sufficient to gain wide authors [Henderson, Clark, 1990]. international reputation. A classic view suggests that market trans- actions are the fundamental drivers of in- novations. Innovations occur through the 1. Theoretical review interaction of user needs (market pull) and seller capabilities (product push) [Rothwell, 1994]. In a market where there are several Modern concepts of the diffusion of innova- independent buyers and sellers, interaction tions were developed mainly by analysing of this kind happens naturally. how buyers perceived innovations in con- However, in a market with only one buyer sumer goods markets, where many potential (monopsony), a different type of interac- buyers are ready to adopt (or not) these inno- tion takes place. Moreover, when it comes to vations. The diffusion of innovations relates niche markets such as markets for solutions to the technical readiness to adopt them and and products for national security, there an innovation culture; no less important is are only a few sellers (oligopoly), and nor- the role played by the imitation of others’ mal market interaction leading to continu- behaviour when other consumers decide to ous product improvement and generation adopt an innovation [Von Hippel, 1986]. of incremental innovations in the course E. Rogers suggested studying innova- of everyday interaction between sellers and tions in context of their adoption by in- buyers is extremely limited. In a certain

РЖМ 18 (4): 497–524 (2020) 500 G. V. Kornilov, A. V. Trachuk sense, it is replaced by a practice where both by suppliers’ offerings and by factors suppliers involve individual buyers in joint such as ties between business and science work and discussion of development results, and the relationships between producers or end buyers organize the development of (e.g. [Lundvall, 1992; Nelson, 1993; 1995; specific solutions using the capabilities of both Malerba, 2006]). It should be noted that in potential suppliers in the market and the both variants, the selection of an innovation national innovation system [Nelson, 1993]. is effected by the very limited number of op- Therefore, demand characteristics, to some tions available to the buyer. This determines extent, serve as an explanation for supply the oligopolistic nature of supply. characteristics. In this case, procurement Given that the buyers are state institu- policy is a more effective tool for stimulating tions, they are obviously inclined to take innovation than directly subsidizing research fewer risks than business entities. Therefore, and development [Geroski, 1990]. the adoption of innovations by such institu- In these conditions, the innovation and tions is usually based on a certain number diffusion process gains some specific par- of references — experience and feedback ticularities. These first of all include the provided by other similar buyers from other dominant role of supply, i.e. use of earlier countries or wide testing in real or close to innovation models — the technology-push real conditions. model. Based on previously published works and Examples of markets with monopsony con- ideas that we have formulated, the creation sumption and oligopoly supply include the and diffusion of innovations in single-buyer aerospace market [Szajnfarber, Richards, markets have the following features: (1) lim- Weigel, 2014], the arms market [Mahoney, ited number of offerings (supplier oligopoly); 2017], and some segments of the pharma- (2) importance of validating information on ceutical market [Kirkwood, 2016]. Problems the effectiveness of the new solution. In related to stimulating new developments, such cases, effectiveness is usually validated selecting and disseminating innovations in through the end buyer’s own product test- these markets are similar. The banknote ing or the experience of such consumers in production market can also be rightfully other countries. included in this list [Trachuk, Kornilov, To explain some of the innovation adop- 2013b]. The goal of state institutions work- tion patterns on the demand side of a single- ing in such markets is to enable the maxi- buyer market, we believe that the concept of mum number of potential suppliers to offer lead markets may be of considerable inter- products and solutions that allow the state est. The concept introduces the notion of to tackle its tasks more effectively. lead markets in the context of geographical However, there are situations when off- markets. In accordance with this concept, the-shelf solutions are not available or can- innovations are introduced in certain coun- not be used due to existing constraints of tries before they have been widely adopted, different nature. In this case, it is funda- subsequently becoming a global standard mental for the buyer to be able to create [Cleff, Grimpe, Rammer, 2007]. the required product using the potential of A lead market can be defined as the geo- the national innovation system and interna- graphical starting point of global diffusion tional cooperation. However, it is not at all processes [Beise, Rennings, 2005]. The char- obvious that such a product or solution can acteristics of lead markets are always related have significant market potential in other to a particular industry; a country can be a markets. This kind of behaviour of single lead market in one industry and a lag market buyers is, however, peculiar to countries in another one. Firms that develop products with a developed innovation ecosystem, and for lead markets benefit from introducing in- in this case the supply will be influenced novations on a global level. At the same time,

РЖМ 18 (4): 497–524 (2020) Identifying lead markets for the international banknote production industry 501 lead markets can benefit from attracting fluence innovation activity in the banknote companies from abroad that seek to launch production market, and also create a tool innovations in the lead market in order to to identify the markets that represent the obtain information for global advancement. greatest potential for promoting new so- The concept of lead markets as a tool for lutions with a potential for further global analysing the differences in innovation ac- diffusion. tivity in individual countries was suggest- ed by M. Beise [Beise, 2001; 2004; 2006]. This concept was successfully used by some 2. Methods firms to organize new product development [Beise, Cleff, 2004]. Later, the application of the concept was extended to a sector lev- We argue that when a single state buyer el, in particular, the automotive industry decides on purchasing innovative products, it [Cleff, Grimpe, Rammer, 2015] and country will focus on experience in the introduction [Herstatt, Tiwari, 2016] or economic union of such products in other markets, which level [European Commission, 2007]. However, will be “lead markets” for the sector being if it was found practical for such narrow mar- studied. The concept of lead markets that ket as for example fish farming [Nijssen et looks at the market from the supply-side al., 2019]. Then, the concept was extended should allow us to explain regularities in to other industries [Rennings, Smidt, 2010; the diffusion of global innovations better Quitzow et al., 2014] and applied to innova- than concepts based on an analysis limited tion diffusion in emerging economies [Tiwari, to innovative offerings only. Herstatt, 2012]. In the study of the diffusion of innova- The purpose of this article is to prove tions in markets where the state is the buy- the hypothesis that single-buyer markets er, we should identify “lead markets” where with a limited number of sellers (monopso- innovations appear before, and facilitate, ny-oligopoly market), including markets for global diffusion. This identification is based solutions and products needed for national on the assumption that there are country security, where the state (or its institutions) markets that were the first to adopt innova- acts as the buyer, have certain mechanisms tive technologies and solutions, which were for diffusing innovations that are inherent subsequently diffused globally, in a sustain- to the consumer market. Many innovation able manner during a long period of time. adoption features can be explained by imi- Contemporary studies presents approach- tative behaviour, when the buyer state (or es to assess “leadership” potential of mar- its agent) starts to use innovations based kets in order to predict which geographical on their adoption by other markets. In the market will become the leader for a par- global market environment, it is possible to ticular product or technology [Beise, 2004; identify regional markets (individual coun- Beise, Cleff, 2004]. This approach is based tries) that will become leaders for individual on identifying five characteristics inher- products. Innovations will be adopted in ent to a lead market. For these purposes it such markets before global adoption. is necessary to identify a set of variables The diffusion of innovations will be con- (indicators) that reflect specific economic sidered by using the international banknote indicators for each characteristic inherent production market as an example. We apply to a lead market. This is an indicator ap- quantitative analysis to identify the exist- proach. It is based on detailed knowledge ence of lead markets and evaluate their sig- of the products, their potential consum- nificance. ers and their performance characteristics. The results of this study should provide This knowledge is used to develop individual additional insight into the factors that in- indicators that can be measured in differ-

РЖМ 18 (4): 497–524 (2020) 502 G. V. Kornilov, A. V. Trachuk ent country markets. These indicators are the only buyer, the state (central bank) is lim- used to construct a consolidated index char- ited in its choice of suppliers. Furthermore, acterizing the potential of the country’s the need to protect the currency circulation lead market for individual products. In a against counterfeiting requires constant de- number of cases, the indicator method is velopment and implementation of new secu- combined with the survey method (inter- rity technologies. view of industry leaders) [Cleff, Grimpe, To test the hypothesis regarding the im- Rammer, 2015]. We find this approach ap- portance of orientation towards “leaders” in plicable but very time and energy consuming diffusing innovations in public markets, we and tried to offer less data and expertise present an approach based on a quantitative sensitive method to identify lead markets. analysis of the adoption of new products Our empirical research data is taken from and solutions, as well as an evaluation of information about the global banknote pro- how quickly they are diffused in the inter- duction market gathered during our study. national market — adoption of innovations Our analysis will use data characterizing the by individual countries. geographical and temporal diffusion of new The subject of this study is the diffusion technologies in the sector. The results should of innovations in the international bank- indicate individual countries or groups of note production market. Banknote produc- countries, which were the first to start us- tion rarely comes into view of economic re- ing technologies that later diffused globally. searchers. However, the information base Next, we will identify the countries that for studying the banknote market is quite are the source of innovations in the sector. extensive: banknote production market re- These data will be compared with data on search [Pizzanelli, 2011], specialized publi- countries leading in implementation. Thus, cations, banknote market news1 and Internet we intend to formulate a model for the dif- resources2. There are several industry con- fusion of innovations. ferences that attract leading experts special- It is assumed that the behaviour of lead izing in banknotes and currency circulation. countries is similar to the behaviour of lead Central banks, banknote manufacturers and users in the consumer market. Lead users external authors publish their studies on are faced with new needs earlier than other how banknotes are perceived by the public consumers in the market [Von Hippel, 1986]. and ways to protect banknotes from coun- The diffusion of innovations in lead markets terfeiting [van Renesse, 1998; De Hej, 2009; precedes their global diffusion [Beise, 2001]. Bonnell, 2010]. There are also studies on The general picture of the diffusion of in- the history of the banknote manufacturing novations in the international market will industry [Bender, 2006]. However, in some be similar to the diffusion of innovations cases, banknote production may involve na- in the consumer goods market as described tional security issues, so not all data are by E. Rogers [Rogers, 2003], that is, there publicly available, but an accessible set of are innovating countries and early adopting countries in the international market, which 1 For example: Currency News. Monthly bulletin are the first to introduce a new product or published by Currency Publication Ltd. since 2002; technology. In the event that a product or Infosecure. Newsletter published by Intergtaf (European technology is widely diffused in these coun- Federation for Print and Digital Communication); tries after it has been introduced, then such Billetaria. International review of cash management markets become lead markets. published by the Bank of Spain. The subject of our study is a market with 2 For example: (1) Banknote Industry News. monopsony buyers and an oligopolistic sup- URL: https://www.banknote-industry-news.com/; (2) Banker’s Guide to Foreign Currency and . ply. The banknote production market can be URL: http://www.banknotestreet.com (accessed: rightly considered to be such a market: being 01.06.2020).

РЖМ 18 (4): 497–524 (2020) Identifying lead markets for the international banknote production industry 503 data is quite sufficient for the purposes of security features and design constitute the this study. main differences between banknotes issued The most common innovation character- by different countries and manufacturers. istic for banknote production is the use of The competition between banknote manu- new security features, which are designed to facturers and material suppliers is played make counterfeit and imitation highly diffi- out in the field of security features that pro- cult. We believe that by analysing processes vide maximum protection at an affordable and the diffusion of new security features, price [Trachuk, Kornilov, 2013b]. Suppliers we will be able to trace the innovation dif- of equipment and materials are the main fusion dynamics in this sector. suppliers of innovations in this industry Banknote production market is well es- [Pizzanelli, 2011]. tablished and the dominant product design is Despite a great variety of banknotes, the widely accepted. The market was disrupted number of security features used on them is several times in last few decades by intro- limited. Some security elements and tech- duction of cashless payment methods and nologies have become an industry standard innovative payment instruments (payment and are used on most banknotes. Others, cards, e-money, cyber currencies, central appearing on the banknotes of one or several bank digital currency etc.) that have led countries, are not further diffused. Finally, to formation of new markets. However so the third group of security elements was far all this radical innovations have little actually developed, but never applied. effect on banknote market in terms of its Study began with identification and de- volume [Trachuk, Golembiovsky, 2012]. The scription of specific innovations, whose dif- incremental innovations meet the challenges fusion can be tracked on a global scale. It posed by modern technologies and new pay- should be noted that, due to advancement ment environment and allow keeping the in copying equipment and changes in print- dominant design intact. ing technology, banknote manufacturers are Modern innovations in different areas are forced to constantly develop and launch new often associated with process of digitaliza- security features on the market, and regu- tion implying that use of digital technolo- larly make changes to the banknote security. gies lead to change of business model and Therefore, to accomplish the tasks of this provide new revenue. Accelerating utiliza- study, we selected innovative security fea- tion of digital technologies is one of the tures used in banknote production, which trends in the banknote industry. However are designed to protect against copying and today it mostly effects designing and pro- duplication, as a product that should be ap- duction processes enabling to minimize time proved by customers. It is important to un- to market. These innovations are common derline the fact that the choice of a specific for any industrial processes and in particu- set of security features in a banknote and, lar for the printing industry. The core inno- consequently, the decision to adopt an in- vations of banknote industry are associated novation, is the prerogative of the customer, with introduction of new security features while the situation when the banknote manu- and indirectly related to digital products. facturer uses features developed by another Security innovations allow central banks company is very common. and law enforcement agencies to confront The study period should be long enough the counterfeiting threat. It is namely the to cover more than a few modernization (up- counterfeiting threat that is believed to date) cycles for banknotes and find out how stimulate the development and adoption pro- the innovations were adopted in this market. cesses related to new security features. A 20-year period would be sufficient to al- Given that basic materials and processes low analysis of innovations in the banknote used in banknote production are similar, the market. In banknote production, changes

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(updates) to banknotes usually occur ap- fused further, i.e. was adopted by the early proximately every 7–10 years. However, the and late majority. The fact that the mar- lifespan of security features can significantly ket adopts innovations early and regularly, exceed this period [De Hej, 2010]. In order to where these innovations are not diffused any obtain meaningful results, the study period further, does not constitute evidence that covered several cycles of banknote design such market is a lead market. changes. This enabled us not just to single The analysis was based on objective data out a market that was the first to introduce on banknote issuance by central banks of all a specific innovation, but also to identify countries. The data source was the industry sustainability with regard to leadership of database on banknotes issued around the individual countries in implementing inno- world with a description of their security fea- vations. tures, intended for law enforcement officers During our study, we were able to de- and banknote manufacturers [International termine the exact period of innovation im- Banknote Designers Association, 2018]. The plementation. This data is available for all data were additionally checked through cen- markets. In the case of the banknote market, tral banks of individual countries. this is the time it took to put new banknotes We chose a time period from 1996 to 2017. into circulation, which is publicly available On the one hand, this period saw a paradigm information. shift in the field of banknote security (start Geographically, our study covers the wid- of extensive use of elements that provide est possible market. The goal is to analyse security against imitation made with digital the behaviour of state institutions (central copying devices), and on the other hand, banks) as buyers in terms of adopting inno- a change in at least several generations of vations. The banknote market is completely banknotes in each country, thus allowing us global and monopsonical for each country to see dynamics over time. The scope of our market. study covered all countries that issued bank- A national or regional market can act as the notes or were members of currency unions lead market [Cleff, Grimpe, Rammer, 2015]. in this period, i. e. a total of 177 countries. Therefore markets identified on the basis of Based on the frequency of use, we iden- quantitative analysis and the first to imple- tified 31 security features and technologies ment innovations can be grouped by technol- for the analysis. They included both features ogy-borrowing approach, having formed clus- used at the beginning of the study and fea- ters using a set of similar innovations. This tures that appeared and were diffused later. will allow us, on the one hand, to test the The systematization of security features hypothesis of the existence of multinational used in banknote production allowed us to lead markets, and on the other hand, to de- divide them into groups based on manufac- termine whether there is a link between lead turing techniques: optically variable materi- markets in terms of adopting innovations and als, holograms, substrates, security threads technology lead countries, where innovation (according to width and visual effect), trans- developers are located. parent windows, and printing features. The The analysis of data on innovation dif- breakdown of features and technologies by fusion allows classifying countries by their group is presented (Appendix, Table 1). position on the innovation adoption curve: Information on banknotes issued around from innovators to laggards. If individual the world was gathered into a single database, markets are regularly classified as innovators which contained the following information for or early adopters, they can be regarded as each banknote: the issuing country, the de- lead markets. However, one condition must nomination, the year when circulation ended, be fulfilled, namely, that once the innovation the year the banknote was withdrawn from was adopted by the countries, it was dif- circulation, and a list of security features.

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As a matter of convenience, the banknotes of active banknotes incorporating a security were grouped by denomination — high, me- feature with a division into high, medium dium and low. The two largest denominations and low denominations; (3) the number of were listed in the high denomination group, issued banknotes per year incorporating a and the two lowest in the low denomination specific security feature versus the total group. The remaining banknotes were listed number of banknotes issued in that year; as medium denominations. The need to group (4) the total number of specific security fea- banknotes by denomination was due to the tures on active banknotes; (5) the number fact that banknotes of different denomina- of banknotes with specific features by parts tions are designed using different approaches. of the world; (6) the number of active bank- In particular, high-denomination banknotes notes with a security feature in countries have more security features, and more expen- with the same level of GDP per capita (over sive features are used on them more often. $64 848, $32 424 — $64 848, $16 212 — Supplementary information in the database $32 424, $8 106 — $16 212, $4 053 — included information on GDP per capita for $8 106, $2 027 — $4 053, $1 013 — $2 027, each country that issued banknotes, the geo- $507 — $1 013, below $507). graphical location of the country (part of After completing initial data analysis, we the world), and the availability of banknote had to eliminate from further study several production in the country. features and technologies that ether did not One parameter, the year when circula- have mass diffusion or were already being tion ended, should be discussed additionally. widely used at the start of our study. Some Different countries follow a different policy features have the potential for mass dif- for withdrawing banknotes from circulation: fusion, but did not acquire it by the end from withdrawing old series from circula- of the data collection period. As a result, tion to unlimited parallel circulation of all 22 features and technologies were left for banknote series issued. In our study, it is further analysis. important to consider when the innovation Quantitative models were constructed on started to be used and its geographical dif- the basis of available data for the diffusion fusion. Therefore, the year when circula- of each innovation. Graphically, the model tion ended was defined as the year when looked like a histogram, in which the number an updated or new banknote of a given de- of countries that introduced new material or nomination was issued. In this case, the old technology was shown on the vertical axis banknote could remain in circulation, but it (Appendix, Table 2). is not used in statistics related to security For example, Fig. 1 shows the diffusion features. of Motion micro-optic security threads sup- The result was a consolidated database plied by the US company Crane Currency. created in MS Access software, which al- For the first time the feature appeared on lowed us to analyse the diffusion of new a banknote in 2006. For three first years it security features in banknote production over been used only on few banknotes around the the past 20 years. The database provided in- world. Since the year 2009 it gained mass formation on the number of security features adoption after which its presence on bank- used every year, in what denominations they notes only grow from year to year reaching prevailed, their ratio to the total number 70 banknotes in 2016. Out of 103 new bank- of issued banknotes, and their distribution notes issued in 2016 18 banknotes featured by geographical location of countries and Motion security thread. Motion is innovative their GDP. Based on database materials, the and expensive security feature and it been following reports were generated: (1) the used primarily at higher and middle denomi- number of active banknotes incorporating nation notes that require better protection a specific security feature; (2) the number (15 banknotes with Motion). That means that

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80 70 69 70

60 54 49 49 50 50

40 31

30 23

No. of banktones 21 20

10 4 4 2 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Fig. 1. Global adoption of Motion security thread by years the security feature is a standard for higher security features appeared on new banknotes and middle denomination notes. was counted. Thus, we are able to indicate This allowed us to distinguish the different the countries that were the first to introduce stages in the adoption of innovations. Three new security features on their banknotes. stages were identified for the purpose of the The leading countries were brought into ta- study: (1) the start of usage of the innovation ble for further analysis (Appendix, Table 2). (first year); (2) the period preceding mass dif- Depending on how many times new features fusion of the innovation (from the second year appeared on country’s banknotes for the to the year preceding mass usage); and (3) the first time or within a period preceding to start of mass usage of the innovation. Usage mass adoption, the country is placed higher of the feature (innovation) on more than 10 in the table. new banknotes per year, which corresponds Additional analysis was implemented in ac- to usage in at least 3–4 new countries, was cordance with the hierarchical cluster analysis taken as an indicator characterizing its mass methodology [Taganov, 2005]. Ward’s method usage in the banknote market. As for the was used to form the clusters; squared Euclidean cycle of changing the banknote series after distance was chosen for determining the dis- 7 years, it means that this feature will be tance between interval variables [Rabinovich, used on banknotes in at least 25 countries. In 2007]. The difference between the clusters was reality, the figure is much higher. In the case calculated by the following formula: of the Motion security thread, it can be seen | || | S W ρ2(∑ ω ∑ s ) , that the feature received mass usage in the R(W,S)= ωϵW sϵS |S|+|W| |W| |S| fourth year after it was launched. However, after the first year of mass usage (17 new where W — cluster formed by two the banknotes in 2009), the feature was widely most proximate clusters; S — any other diffused even further, and in 2016 it was cluster distance to which is to be calculated; used on 70 banknotes in different countries. R — distance functions between clusters; Statistical information was processed us- ρ — distance functions between objects; ω, ing the SPSS software: the number of times s — objects of clusters W and S.

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Table Fragment of clustering results

W/ W/ Color Iridescent Thread Thread Holo Dimetallized Cluster OVI Spark changing Motion Holostripe Ink (up to 2 (wider2 Thread Thread Thread mm) mm) 1 0.65 0.67 1.46 0.79 1.94 0.33 0.55 0.49 2.37 0.70 2 1.72 2.16 3.93 2.93 6.47 1.34 4.14 0.59 9.43 2.16

N o t e: OVI — optical variable link.

This method enables to trace the cluster lead markets for the banknote production formation based on the closest choice of secu- market and confirm their temporal stability. rity features starting from small groups and ending up with two large clusters (Table). As a result, we obtained clusters, whose 3. Results main difference lay in the number of features used. Clustering allowed us to systematize countries by their approach to the choice The number of banknote users in the world of particular security features (Appendix, is limited and constant. The global market Table 3). is very stable in terms of the number of In order to identify the source of inno- customers, and despite the fact that from vations in the banknote production indus- time to time states start issuing their own try, we analysed patent activity by region. banknotes, whereas they previously used cur- The analysis was carried out in the single rencies of other countries, or several coun- global patent and copyright database main- tries form currency unions, these events do tained by the European Patent Office. To not have a significant impact on the market. determine patent activity in the security As a rule, one consumer of banknotes cor- printing industry in comparison with other responds to one country. existing printing methods and materials, we In total, around 400 bln banknotes are in used subclass B41M as a search criterion circulation throughout the world. Furthermore, (printing, duplicating, marking or copying despite the development of electronic payment processes; colour printing) to which group systems, the number of banknotes in circula- B41M 3/14 (security printing) belongs, ac- tion continues to grow by about 5% per year. cording to international patent classifica- In order to replace worn-out banknotes in cir- tion. culation, and to ensure monetary circulation in Thus, this methodological approach al- national economies, about 170 bln new bank- lows us to: (1) identify the main innovations notes are issued annually in the world. Overall, in the industry; (2) to form a temporal and the global turnover of the banknote production geographical model for the diffusion of each market is estimated at about $10 bln. innovation; (3) identify groups of countries The banknote production industry has a where innovations are introduced first and number of features that distinguishes it are later diffused globally; (4) group coun- among other industries, including among tries by approaches used in selecting innova- other types of printing production. The in- tive solutions; (5) compare information on dustry has obvious special characteristics countries that are the first to adopt innova- in terms of both buyers and manufacturers, tions with countries where the innovation as well as in terms of suppliers of materials was created. As a result, we should identify and equipment. The value created in this

РЖМ 18 (4): 497–524 (2020) 508 G. V. Kornilov, A. V. Trachuk industry that is protection against unau- number of banknotes of different denomi- thorized copying and imitation (counterfeit- nations issued globally remains about the ing) is rather unique. same: banknotes of low denomination — In total, there are about 60 banknote man- 847 variants, high denomination — 844 ufacturers in the world today (the exact fig- variants, medium denomination — 1 400 ure may vary from year to year, depending variants. Taking into account that, on the on whether a particular factory manufactured average, banknotes of seven denominations banknotes in a given year). Enterprises that are issued in a country, the number of vari- manufacture banknotes are most often high- ants of medium-denomination banknotes is ly specialized. Banknote production requires dominant. special expensive equipment, which has lim- Annually, about 125 new or updated bank- ited application in the manufacture of oth- notes are put in circulation. About 50 coun- er printing products. Such enterprises are tries annually update one or more banknotes. subject to high security requirements, which The spikes in introduction of new banknotes restrict manufacture of other products. In in some years (for example, 2000, 2006, 2012) addition, a product run from several tens are not manifestations of a cyclical pattern, of millions to several billions per year is but only reflect the situation when, due to quite sufficient to fill the production pro- internal factors, several countries put new gram [Trachuk, Kornilov, 2013b]. banknotes in circulation in the same year. Geographically, most of the banknote pro- Security features on banknotes fit into ducers are located in Europe (25 companies), classical models of product life cycles and the 18 companies are located in Asia, 11 in America, diffusion of innovations [Trachuk, Kornilov, 7 in Africa, and 1 in Australia. At the same 2013b]. As an example, Fig. 2 shows his- time, the largest number of circulating bank- tograms for the diffusion of the two most notes can be found in Asian countries. used features in modern banknotes — OVI Banknote producers are mostly state- and Spark. Both features use special inks owned and are accountable to central banks that change colour when the banknote is or, more rarely, to ministries of finance. titled. Spark is an improved OVI. Both inks There are also six non-state companies, are produced by the Swiss company SICPA. which are almost totally oriented towards The vertical scale indicates the number of obtaining orders for banknote production banknotes on which this feature is used. in the commercial market. All these com- The dissemination of OVI and Spark fea- panies are located in Europe and the USA. tures demonstrates the perfect mechanism The commercial banknote market is esti- for promoting innovation in the industry. mated at about $1.5 bln, which is about 26 Moreover, the use of this feature clearly fits bln banknotes per year. into the time frame of our study. There are also 25 substrate production The diffusion of this feature represents companies, most of which are in Europe. a bell-shaped curve that is characteristic They focus mostly on producing paper for of the product’s life cycle. After its first banknotes. Only 14 companies in the world appearance in 1987, the feature was most manufacture paper and print banknotes at widely diffused by 2008, when it was used the same time, thus controlling the entire on 228 banknotes. In the same year (2008), a banknote production cycle. Spark element appeared and started actively On average, the number of new banknotes penetrating the market, gradually replacing issued annually remains stable. The study OVI. Other features demonstrate similar life showed that between 1996 and 2017, more cycle patterns. Finally, it turned out that than 3 100 unique banknotes were issued, that OVI is still widely used for the lower i.e. banknotes that were newly designed or denomination banknotes but for the newly redesigned from the previous series. The issued higher denomination banknote the

РЖМ 18 (4): 497–524 (2020) Identifying lead markets for the international banknote production industry 509

250 228 223 204 196 194 194 200 185 177 174 172 165 157 160 151 150 141 137 139

110 111 116 93 100 88 72 72 61 49 54

No. of banktones 50 36 41 28 6 6 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

OVI Spark

Fig. 2. Global adoption of OVI and Spark security features by 1996–2017 central banks prefer to use more secure and facilities. These countries use modern equip- expansive Spark. We can say that Spark has ment in their manufacturing process, and a potential for further increasing its market conduct independent research in banknote share reaching at least the figures of previ- production technology. Thus, they are cus- ous generation OVI feature. tomers that select security features accord- As a result, it was possible to identify ing to their own analysis of information and the countries that were always among the practical results. Nevertheless, it should be first to introduce new security features on noted that none of these countries produce their banknotes during the study period. banknote printing equipment and that they They fell either into the group of countries do not develop their materials and are com- that were the first to use a certain security pletely dependent on imported technologies. feature on their banknotes or into the group The other six countries — Singapore, Scot- of early adopters. These countries include land, the United Arab Emirates, Lebanon, Singapore, Thailand, Scotland, the UAE, Latvia, and Oman — do not have their own Poland, Lebanon, Bangladesh, Chile, Egypt, banknote printing facilities, but they all Latvia, Morocco, and Oman. Countries that regularly order new batches of banknotes come close include Kazakhstan, Malaysia, (every few years). However, the security Russia, and Switzerland (Appendix, Table 2). features are usually updated whenever such Although the countries on the list are orders are placed. These countries have a very different, the common features in- shorter banknote replacement cycle and can herent to all of them draw attention. Most consider using new technologies before oth- of these countries regularly update their ers. banknote series, each time introducing new Clustering countries by preferences for security features. The recommended update security features allows us to divide them cycle is every 5–7 years, but this cycle is into two large groups, the main character- shorter in these countries as a whole. Out istic of which is the number of security fea- of the twelve countries that were the first to tures used in banknotes. The countries in introduce security features, six of them — the first cluster generally use fewer secu- Thailand, Poland, Bangladesh, Chile, Egypt, rity features, while the countries in the and Morocco — have their own production second cluster use more security features

РЖМ 18 (4): 497–524 (2020) 510 G. V. Kornilov, A. V. Trachuk in their banknotes. It is worth noting sepa- level in these countries. In this regard, the rately the group of countries using polymer development of protection systems in these banknotes. Although they stand out prom- countries is not related to the counterfeit- inently among the other groups, countries ing threat, or the protection and prevention using polymer banknotes generally fall into level is such that counterfeit banknotes do the first cluster. The clusters do not differ not appear in large quantities. in any way in all other respects, and it is The analysis of industry information of impossible to determine whether there is security features in 22 groups in the study strong preference to specific security fea- database showed that authorship belongs to tures. On the contrary, security features companies from Switzerland (3), Germany that are most in demand have high indica- (4), Japan (1), Great Britain (3), USA (1), tors in both clusters (Appendix, Table 2). and Russia (1). As to the other innovations, Analysis of patent and industry informa- it is rather difficult to identify where they tion allowed us to highlight innovation sourc- were developed first, since they were designed es in the industry. Secure printing is one at the same time by different companies. of the most patentable fields among all print- However, these companies were also from ing methods and materials, lagging behind the USA, the UK, Switzerland and Germany. only digital printing methods. In subgroup All the countries where these companies are B41M 3/14 (secure printing) there are 16 based fall into the list of leaders in patent 155 patents and copyright certificates issued activity in the field of secure printing. over the past 5 years, representing 6.38% We found a discrepancy between the list of the total patents in the B41M subclass. of countries that are the first to implement Secure printing constitutes one of the fast- innovations and the list of countries where est growing fields of patent activity: over innovative solutions have been developed. the past 5 years, the number of issued pat- Switzerland is the only country that is in- ents has increased by nearly 1.6 times (3 cluded in both lists (it somewhat fell short 881 patents and 9th position in the ranking of the leading countries in the list of first in 2010 compared to 6 147 patents and 7th adopters). We note that the lack of intercon- position in 2015). nection between these lists is steady through The leading companies in patent activity time. Countries developing security features in the industry are companies from Germany, are never the first to introduce their devel- Switzerland, the United Kingdom, Japan, opments in their own banknotes. On the and the USA. Corporate leaders include contrary, in cases where a development was Giesecke & Devrient (Germany) — 6.05%, first introduced in their own banknotes (for SICPA (Switzerland) — 5.21, Bundesdruckerei example, Canada, the Netherlands, Russia (Germany) — 2.04, De La Rue (Great and some other countries), it was not dif- Britain) — 1.98, Dainippon Printing (Japan) — fused globally. It can be concluded that in 1.92, and Kurz (Germany) —1.98%. the field of banknote production, some coun- Basing our analysis of the top 50 patent- tries look to other countries when choosing ing companies in the secure printing indus- security features for their banknotes. try, we concluded that innovation sources Dividing countries by common security of banknote production are countries such features on banknotes has shown that coun- as Germany, Switzerland, the USA, Great tries that develop security features (Japan, Britain, and Japan. All the non-governmen- the USA, Switzerland, the United Kingdom, tal companies producing banknotes are lo- and euro-zone countries) are much alike in cated in these countries (and also in France). choosing the way they protect their bank- All of the above countries are not in- notes. On the one hand, this suggests a high cluded in the risk area linked to counter- level of technological cooperation between feiting. Analysis shows a low counterfeiting companies from these countries, and on the

РЖМ 18 (4): 497–524 (2020) Identifying lead markets for the international banknote production industry 511 other hand, this is due to the fact that they 4. Implications are guided by tested and proven security solutions that have already been introduced We examined the peculiarities related to the in other markets. diffusion of innovations in markets with mo- We believe that the pattern for the dif- nopsony buyers and an oligopolistic supply. fusion of innovations in banknote produc- Such markets include, in particular, prod- tion is as follows: the source of an innova- ucts and solutions designed to address na- tive product or solution is one of the coun- tional security objectives. We also identified tries in Europe (Switzerland, Germany, or lead markets, where adoption of innovations the UK) or the United States. The devel- precedes their diffusion in other markets. oper of a feature is often a private company The study was based on data on the global working in this sector. Subsequently, the banknote market. feature is introduced on banknotes of the The study showed that when choosing countries for which the developer or partner solutions in fields related to national secu- company manufactures banknotes. The sec- rity, states seek to use tested solutions that ond group of banknotes on which new fea- have proven themselves in other geograph- tures are introduced is formed by banknotes ical markets. However, there are countries of countries that have their own qualified that act as leaders for the industry, that is, production facilities. innovations introduced in these markets The list of countries that are the first to subsequently become an industry standard use new security features does not include and are globally diffused. Using the bank- countries with a high level of counterfeit- note market as an example, we determined ing. This is apparently due to two factors. that such markets are not found in countries First, manufacturers take a more responsi- where innovative solutions have been devel- ble approach to selecting specific types of oped. Two groups of national markets act security features. Secondly, these countries as leaders in the banknote industry. First, have a more developed counterfeiting pre- countries that have their own modern pro- vention system, which explains the presence duction and can carry out a competent expert of qualified buyers in these countries. study on the proposed solutions. Second, Features used on banknotes of countries countries that order development and pro- with a high level of counterfeiting fall into duction from external companies that are the group of those that do not gain widespread industry leaders and developers of innova- diffusion. In turn, countries where counter- tive solutions. feiting is rising are guided by the examples Thus, lead markets are not those where of leaders, and adopt the best features used the product (solution) was developed, but on banknotes circulating in lead markets. those where the solution was adopted and The most important factor for the dif- successfully proved itself. There are at least fusion of innovations in the banknote in- twelve countries in the banknote market, dustry is technology adoption by lead coun- on whose banknotes most of the new secu- tries. As the study shows, the features that rity features that were subsequently diffused appeared immediately on banknotes of the globally found their first application. For developer countries were not guaranteed companies operating in such specific markets global success. On the contrary, there is a as markets for national security solutions chance that they will not be diffused, which this means that the effective implementation can be explained by the developer’s reluc- of their developments in countries classified tance to transfer technology or materials into the leader group is the key to success- to other manufacturers. In some cases, such ful widespread diffusion of their solutions. reluctance can be determined by the first Leadership in developing and implement- customer’s position. ing solutions in own national market does

РЖМ 18 (4): 497–524 (2020) 512 G. V. Kornilov, A. V. Trachuk not guarantee global diffusion. Attempts to Consequently, the question arises as to implement an innovative solution in non-lead the extent to which the lead market at- markets lead to the solution not gaining tribute remains stable over time. Under widespread diffusion. In addition, a market what conditions and when can a change unstable in terms of national security threat in status occur? does not inspire confidence in the solution 3. Does a lead country get real benefits from proposed in it, even if the solution itself is its status, or, on the contrary, it incurs not compromised. When there is real danger costs associated with the testing of new to national security, this is not the best time technologies and pays a premium for the to test new solutions. possibility of being the first to implement Our study showed that not only developed an innovation? markets, but also emerging markets can be- come lead markets in products for the state. As national security issues addressed by dif- 5. Conclusion ferent countries tend to be the same, devel- opers should not be focused solely on devel- oped countries to implement their innova- Analysis of the banknote market from the tive solutions. Provided they have a stable point of view of the lead market concept con- internal security situation, developing or tributes to the development of innovation catching-up countries are well suited for adoption theory. Firstly, it demonstrates that innovation implementation. the same principles for diffusion of innova- With regard to countries seeking nation- tions operate in the market for products for al security solutions, the results of our study the state, which is characterized by a mo- indicate that conducting own development nopsonic demand, as in markets for other is not the most effective approach. In order products. Secondly, orientation towards lead to find an effective national security solu- markets is one of the most important factors tion through inter-industry communication in choosing an innovative solution for gov- mechanisms, it would be better to identify ernment procurement of products (solutions) development leaders and markets where so- for national security needs. lutions are applied first. It is most effective When choosing a strategy to market new to use solutions launched on the market a products, companies operating in the bank- few years before. Most developed countries note industry should primarily focus on coun- follow this path. tries that have their own production. In case We are convinced that an approach to such new products become successful in these public procurement market analysis from countries, they are more likely to be diffused the standpoint of the lead market concept more widely in the industry on a global scale. creates a new understanding of these mar- On the other hand, a new security feature kets. Topics for further studies can be the initially introduced in the market where there following. is a high threat level (in the case of bank- 1. Studies to confirm the possibility of iden- notes, the counterfeiting threat), does expose tifying lead markets in other public pro- it to the risk that it will not gain diffusion. curement fields, in particular, the arms A similar situation arises when innovations market or the pharmaceutical market. are introduced on the developer’s home mar- Conclusions of such studies may show that, ket. when making a decision, states can be The methodological approach used to iden- guided not so much by actual needs, but tify lead markets has several restrictions. by innovations adopted in lead markets. In particular, the banknote market is quite 2. It is obvious that the characteristics of distinct and data on banknote issuance are a lead market can change over time. readily available. As regards other markets,

РЖМ 18 (4): 497–524 (2020) Identifying lead markets for the international banknote production industry 513 where the state or its agents are customers, to other markets that have state buyers. On it may turn out to be more difficult to iden- the one hand, it will lead to a better under- tify the diffusion of innovations. In this standing of decision-making logic in adopt- regard, other methods will be needed to ing innovations, and on the other, it can identify lead markets. guide suppliers as to the most efficient mar- We believe that the approach involving kets in terms of subsequent diffusion of identification of lead markets is applicable innovative products.

Appendix

Table 1 Groups and individual security features and technologies used in banknote production chosen for analysis

Group of security features and security technologies Security feature or technology Optical variable inks (OVI) Optical variable magnetic inks (Spark) Colour shift Iridescent inks Other (DID, Lead, etc.)* Holographic patch Holograms Holographic stripe Paper* Durable paper Substrate Polymer substrate Post-print varnishing* Narrow widow thread (up to 2 mm) Security threads (by width) Wide window thread (over 2 mm) Fully embedded thread Holographic thread Colour shifting thread Thread with moving image (Motion) Security thread (by visual appearance) Rolling Star thread Security thread with demetallization Other types* Made by die-cutting Transparent window in substrate Security thread with transparent window Transparent widow in polymer — excluded Combination of offset and intaglio printing* Blind embossing Omron rings Foil embossing Printed features Metallic inks Up-converting inks* Infra-red inks POLE* Thermochromic ink*

N o t e: * excluded.

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Table 2 Countries on which banknotes new security features are introduced in periods preceding to mass adoption

Total new Implemented Implemented Implemented Country features amongst the before the mass Average figure after first 10 implemented first adoption Singapore 9 5 3 7 5.0 Thailand 8 5 4 8 5.7 Scotland 8 5 4 3 4.0 UAE 7 5 4 3 4.0 Poland 7 4 4 3 3.7 Lebanon 6 5 2 5 4.0 Bangladesh 6 3 5 4 4.0 Chili 6 3 6 2 3.7 Egypt 6 5 2 3 3.3 Latvia 6 4 3 3 3.3 Morocco 6 4 2 3 3.0 Oman 6 3 2 4 3.0 Malaysia 5 4 5 5 4.7 Russia 5 3 3 3 3.0 Switzerland 5 2 3 4 3.0 Jamaica 5 4 1 3 2.7 Bulgaria 5 4 2 2 2.7 Botswana 5 3 3 2 2.7 Hong Kong 5 3 3 2 2.7 Zambia 5 4 2 1 2.3 China 5 3 3 1 2.3 Estonia 5 3 2 2 2.3 Bermuda 5 2 3 2 2.3 Nepal 5 1 3 2 2.0 Kyrgyz 5 1 1 4 2.0 Republic United 4 4 3 3 3.3 Kingdom Djibouti 4 3 3 4 3.3 Kazakhstan 4 3 3 3 3.0 Finland 4 2 3 4 3.0 Bahamas 4 1 4 3 2.7

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Table 2 (end)

Total new Implemented Implemented Implemented Country features amongst the before the mass Average figure after first 10 implemented first adoption Belgium 4 2 3 2 2.3 Germany 4 1 3 3 2.3 Samoa 4 0 3 4 2.3 Belarus 4 3 1 2 2.0 Lesotho 4 2 1 3 2.0 Malawi 4 1 2 3 2.0 Mexico 4 2 2 1 1.7 Sweden 4 2 2 1 1.7 Taiwan 4 2 2 1 1.7 Faroes Island 4 2 1 2 1.7 Armenia 4 2 2 1 1.7 Cabo Verde 4 2 2 1 1.7 New Zealand 4 3 1 0 1.3

Table 3 Clusters of countries by their approach to the choice of banknote security features

Cluster 1 Cluster 2 Afghanistan, Albania, Algeria, Association of three Angola, Argentina, Armenia, Bahamas, Bahrain, overseas territories of France, Australia, Azerbaijan, Bangladesh, Barbados, Belarus, Bosnia and Belize, Bermuda, Bolivia, Botswana, Brazil, Brunei, Herzegovina, Burundi, Colombia, Dominican Bulgaria, Butane, Cambodia, Canada, Cape Verde, Republic, East-Caribbean Monetary Union, Egypt, Cayman islands, Chile, China, Congo, Costa Rica, Eritrea, Guatemala, Guinea, Hong Kong, Croatia, Cuba, Czech Republic, Denmark, Estonia, Hungary, India, Indonesia, Iraq, Jamaica, European Monetary Union, Falkland Islands, Faroe Kazakhstan, Kuwait, Kyrgyzstan, Lebanon, Libya, Islands (Denmark), Fiji, Gambia, Georgia, Ghana, Macao, Malawi, Morocco, Namibia, Nepal, Gibraltar, Guernsey, Guyana, Haiti, Honduras, Nicaragua, North Korea, Oman, Paraguay, Iceland, Iran, Israel, Japan, Jersey, Laos, Latvia, Philippines, Poland, Rwanda, Scotland, Serbia, Lesotho, Liberia, Macedonia, Madagascar, Malaysia, Seychelles, South Africa, South Sudan, Maldives, Mauritania, Mauritius, Mexico, Moldova, Sri Lanka, Suriname, Swaziland, Tajikistan, Mongolia, Mozambique, Myanmar, New Zealand, Thailand, Tonga, Transnistria, Tunisia, Turkey, Nigeria, Northern Ireland, Norway, Pakistan, Papua Turkmenistan, Uganda, United Arab Emirates, New Guinea, Peru, Qatar, Romania, Russia, Samoa, Zambia Saudi Arabia, Sierra Leone, Singapore, Solomon Islands, South Korea, Sudan, Sweden, Switzerland, Syria, Taiwan (Republic of China), Tanzania, The Economic Community of Central Africa, Trinidad and Tobago, Ukraine, United Kingdom, Uruguay, USA, Uzbekistan, Vanuatu, Venezuela, Vietnam, West African Economic and Monetary Union, Yemen, Zimbabwe

РЖМ 18 (4): 497–524 (2020) 516 G. V. Kornilov, A. V. Trachuk

350 313 312 304 292 298 300 294 300 284 285 288 254 238 250 200 200 170 150 150 107 100 80

No. of banktones 61 37 50 14 15 21

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year Fig. 1. Banknotes in circulation with Iridescent ink

150

126 123 118 119 115 116 120 113 114 103 107 99 94 91 90 90 81 71 64 57 60 51

34

No. of banktones 30 24 16

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year Fig. 2. Banknotes in circulation with holographic patch

200

165 158 161 159 148 152 150 141 136 129 113 118 107 97 100 92 72 59 47 50 No. of banktones 35 26 10 14 1 4 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Fig. 3. Banknotes in circulation with holographic strip

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15 14 13 12 12 12 11

9 8

6 6 5

No. of banktones 3 2

0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Fig. 4. Banknotes in circulation with durable paper

120 106 98 100 94 86 81 80 73 71 73 63 57 60 54 47 39 40 31 24 26 No. of banktones 23 18 19 20 12 8 9

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Fig. 5. Banknotes in circulation with polymer substrate

600 557 558 538 511 495 495 481 486 481 496 500 473 464 456 474 469 453 438 449 422 424 430 391 400

300

200 No. of banktones 100

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Fully embedded thread Narrow window thread (≤ 2 mm) Wide window thread (> 2 mm)

Fig. 6. Banknotes in circulation with security thread

РЖМ 18 (4): 497–524 (2020) 518 G. V. Kornilov, A. V. Trachuk

100 88 85 86 85 85 83 77 79 78 80 70 67 68 64

60 50 51

34 40 32 25 21

No. of banktones 20 10 8 9

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Fig. 7. Banknotes in circulation with holographic thread

250

196 202 200 200 183 171 163 143 150 130

97 100 84 63 42 48 No. of banktones 50 31 19 19 23 3 9 10 10 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Fig. 8. Banknotes in circulation with colour shifting thread

1000 944 929 866 800 793 804 763 777 763 780 800 736 754 686 633 592 600 518 503 471 400 400 351 316 260 No. of banktones 200

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Fig. 9. Banknotes in circulation with colour shifting thread

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80 70 69 70

60 54 49 49 50 50 Motion 40 31 30 Rolling Star 21 23 20 No. of banktones

10 4 2 4

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Fig. 10. Banknotes in circulation with thread

25 22

19 19 19 20 18 17 16 16 16 15 14 15 14 made by 11 10 die-cutting 10 8 8 security 6 5 thread with 4

No. of banktones traqnsparent 5 3 2 window 1 1 1 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year Fig. 11. Banknotes in circulation with security features

200 198 200 188 166 171 165 176 160 161 164 146 149 150 136

117

97 101 100 72 59

50 No. of banktones 35 23 26 8

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Fig. 12. Banknotes in circulation with blind embossing

РЖМ 18 (4): 497–524 (2020) 520 G. V. Kornilov, A. V. Trachuk

250 219 228 233 212 215 230 196 200 189 168 152 154 150 134 140 98 100 84 68 52 50 25 31 10 11 No. of banktones 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Fig. 13. Banknotes in circulation with omron rings

75 80 72 74 72 68 70 64 65 64 63 63 60 60 59 57 57 60 47 49 50 42 40 33 27 30 20 22 20

10

No. of banktones 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Fig. 14. Banknotes in circulation with foil embossing

300 243 251 250 235 217 220 211 203 199 205 205 199 198 200 184 193 187 189 200 168 145 150 125 133 110 100

50

No. of banktones 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Fig. 15. Banknotes in circulation with metallic ink

198 200 1200 199 205 189 205 187 235 243 251 220 211 1000 217 199 203 800 193 168 184 600 145 125 133 110 400

200 No. of banktones 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Fig. 16. Banknotes in circulation with Infra-red inks

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Initial Submission: June 30, 2020 Final Version Accepted: December 30, 2020

Определения лидирующих рынков для международной индустрии производства банкнот Г. В. Корнилов АО «Гознак», Россия А. В. Трачук «Высшая школа управления» Финансового университета при правительстве Российской Федерации, Россия

В статье представлено теоретическое исследование диффузии инноваций и исследуется роль фактора ориентации на ведущие рынки при внедрении инноваций на международных рынках

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продуктов и технологий для решения задач национальной безопасности с доминированием государственных закупок. Исследование основывается на данных, полученных в результате анализа инноваций в отрасли производства банкнот. Международный рынок банкнот, харак- теризующийся ограниченным числом покупателей (монопсония) и поставщиков (олигополия), является примером высокоинновационной отрасли, выполняющей задачу поддержания нацио­ нальной безопасности — обеспечения наличного денежного обращения. Это глобальная отрасль, основной фокус инновационной активности которой сосредоточен на постоянной разработке новых защитных технологий, применяемых большинством центральных банков мира. Результаты анализа указывают на то, что фактор ориентации на ведущие рынки является одним из клю- чевых при принятии решения центральными банками в процессе выбора конкретных защитных признаков и технологий, используемых при производстве банкнот. При угрозе национальной безопасности географическое происхождение технологии играет меньшую роль, чем защитная ценность технологии сама по себе. Представляется, что фактор ориентации на ведущие рынки является особенностью диффузии инноваций в исследуемой отрасли и должен быть распро- странен на те сферы, в которых государство выступает в качестве единственного покупателя при ограниченном предложении, например в оборонной промышленности, исследованиях космоса, на отдельных фармацевтических рынках и др. Ключевые слова: лидирующие рынки, индустрия производства банкнот, национальная безопасность, диффузия инноваций, денежное обращение. JEL: G21, H76, L69, O33. For citation: Kornilov G. V., Trachuk A. V. 2020. Identifying lead markets for the interna- tional banknote production industry. Russian Management Journal 18 (4): 497–524.

Статья поступила в редакцию 30 июня 2020 г. Принята к публикации 30 декабря 2020 г.

РЖМ 18 (4): 497–524 (2020)