This study examines leadership dynamics in the regional jet manufacturing industry from the 1980s onwards. With the help of leading products aircraft or aircraft family, British Aerospace BAe, Fokker, Bombardier and Embraer consecutively took the leadership in terms of new deliveries. In order to understand the co-evolution of demand for aircraft, technology and industrial structure, the paper applies a framework for innovation system dynamics that investigates in detail the preconditions for growth, windows of opportunity and strategic response of firms. In the first major leadership change, BAe and Fokker lost their leadership to Bombardier, which was the first to respond to a combination of windows of opportunity more efficient jet engine technology, cheaper oil prices, market liberalization and the expansion of regional services boosted by the introduction of scope clauses that created a niche for the 50-seat market. Bombardiers radical innovation, the business-jet based CRJ200 became the leading product of the 1990s. A second leadership change occurred in 2005, as new demand and regulatory windows increasing oil prices, more competitive market, fluctuating economy, relaxing scope clauses opened new opportunities for the 70-120 market segment to the detriment of both the 50-seat regional and 150-seat large civil jet markets. The Brazilian Embraer, with its already proven design, manufacturing and marketing capabilities in the regional jet industry was the first to make a strategic move and introduce a new product line, the ERJ-170/190 specifically intended for this market. The fate of failed challengers and past leaders points to the importance of preconditions, timing of windows of opportunity, speedy strategic response by companies and a proper evaluation of future demand. The long lead time between development and entry into serial production necessitates favourable demand windows both during the development and the serial production phases in order to turn a new product into a leading product, thus timing of response was found to be critical not only for gaining leadership, but also for staying in the market and recovering sunk costs.
