The literature on lead markets has long argued that the global diffusion of innovations is often driven by the country-specific attributes of a lead country. However, less attention has been paid to the sub-national level. Can region-specific attributes of a lead region drive national diffusion? This paper takes the lead market model and applies it to the diffusion of photovoltaic systems among households in Germany. Based on an indicator-based approach, our paper identifies the presence of both lead and lag markets at the sub-national level. Our findings show the importance of the lead market characteristics (i.e., demand, cost, export, transfer and market advantages) of early adopter sub-national regions as critical drivers of the national diffusion of innovations. This is particularly important for policymakers seeking to influence the diffusion of environmental innovations through institutional support. If a national policy can drive the diffusion of an innovation in a specific sub-national region that has lead market attributes, the diffusion in other regions is likely to follow the lead region subsequently.