international product life cycle

export new mature standardised

net product product product

time

developed developing inventor’s

country country country

country where new product is launched

other advanced, high-income country
developing, low-income country

based on: Raymond Vernon , 1966. International investment and international trade in the product cycle, The Quarterly Journal of
Economics, 80(2), pp. 190-207.
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list of innovations

innovating country innovation market stimulant

rifle with interchangeable parts scarcity of artisan labour
railway automatic signal block high cost of unskilled labour
automatic bottle-making machine scarcity of artisan labour
mass-produced automobile large size middle-income market
United States
drip-dry shirt high cost of laundries
atomic reactors guaranteed military demand
jumbo jet guaranteed military demand
frozen foods large size middle-income market
synthetic fertiliser scarcity of fertile land
synthetic dyestuffs guaranteed military demand
Germany
ethical drugs subsidised universal medical care
rayon scarcity of raw materials
synthetic paper scarcity of raw materials
Japan
miniature television relative small size of homes

source: Raymond Vernon , the economic environment of international business, Prentice-Hall, USA, 1972.

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three stages from the initiating country’s viewpoint

international product life cycle

production
product stage trade target market competitors cost locally

limited;
USA / inventor’s
1 new production for
country
few local firms initially high
home market

USA, advanced
competitors from declining due to
increasing and later
2 mature exports developing
advanced economies of
markets scale
markets

increase owing
declining export competitors from to lower
at first; later in USA / inventor’s mostly economies of
3 standardisation phase become country developing scale and
imports markets comparative
disadvantages

based on: Raymond Vernon , 1966. International investment and international trade in the product cycle, The Quarterly Journal of
Economics, 80(2), pp. 190-207.

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