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II Brief Introduction
Products have a limited market life PLC four stages (Marketing) location of production shifts dynamic development of comparative Advantage Theory based on Technological Gap Theory.
The Product Life-Cycle Theory
The product life-cycle model of trade (PLC) (PCT)
Product Cycle Theory
Why?
Consider: “The model (PLC) claims that many products go through a trade cycle, during which the United States is initially an exporter, then loses its export markets and may finally become an importer of the product. ” ——Louis T. Wells, JR
To explain the causes of international trade and trade patterns based on the changes in technology ,in 1961, the U.S. economist M. V. Posner proposed the Technological Gap Theory and gave an explanation.
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PLC Model
New Product Maturing Product Standardized Product
Stages of Product Development
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More…
The PLC hypothesis in a new international environment has been changing for two reasons: geographical reach (network‟s spread) overseas subsidiaries (子公司) national markets of the advanced industrialized countries differences reduce ----Raymond Vernon
Stage II: The Maturing Product
Stage III: The Standardized Product
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III Stages of the Product Cycle
Stage I: The New Product Stage II: The Maturing Product
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Stage III: The Standardized Product
III Stages of the Product Cycle
Stage I: The New Product Stage II: The Maturing Product Stage III: The Standardized Product Completely standardized; Technology accounts less (LDC) Profit margins are thin, and competition is fierce. Labor-intensive (unskilled)
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III Stages of the Product Cycle
Stage I: The New Product ----Innovation highly skilled labor; capital for R&D; location non-standardized; high cost; monopolize Technology-intensive No international trade happens
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OUTLINE
1. Background 2. Brief Introduction 3. Stages of the Product Cycle 4. Trade Implications of Product Cycle
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I Background
Factor Endowment Theory assumed that: same
T1-T3-T4-T5--
U.S. Imports from other nations.
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PCT: Dynamic understanding
As the product life cycle stage changes, the determinants affecting the comparative advantage is changing. Therefore, different types of countries can be in different stages of comparative advantage. technology-intensive capital-intensive labor-intensive (unskilled)
A demand lag (需求时滞)
A imitation lag (模仿时滞)
A reaction lag (反应时滞) A mastery lag (掌握时滞)
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Technological Gap Model
创新国生产和出口 创新国生产
创新国出口 模仿国进口
t0
国际贸易的可能
需求时滞
t1
t2
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PLC Model
(Manufactured Goods)
Exports
America
Canada and EU
Developing nations
to
t1
t2
t3
t4
t5
Time
Imports
Canada and EU import from U.S.
Developing nations import from U.S. and Canada and EU
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I Background
Technological Gap Theory (技术差距论)
Trade maybe caused by technical changes and developments. “Particular technical changes originate in one country, „comparative cost differences‟(比较成本差异) may induce trade in particular goods during the lapse of time taken for the rest of the world to imitate one country‟s innovation. ” ——International Trade and Technical Change
Technological development of a new product generally has three stages: new product stage, the stage of maturity and standardization.
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II Brief Introduction
Increasingly standardized flexibility in design; manufacturing declines; competitors develop; (prices and profit margins) Loses market or invests abroad trade and investment are intertwined Capital-intensive
A product’s life World trade ——Raymond Vernon Manufactued countries
Import & Export trade Technology transfer FDI (Foreign Direct Investment)
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IV Trade Implications of the Product Cycle
A. The product is initially designed and manufactured in the U.S. B. As the product moves to the maturing product stage, production expands to other advanced countries. C. The standardized production stage sees the comparative advantage of production and export shift to less developed countries.
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Thank You!
technology in production; production function(生产函数); kind of products.) ( eg: some advanced countries: share very similar general economic conditions) But in reality, the technology every country adopted does exist gap, and this gap is dynamically changing.