International Investment and International Trade in the Product Cycle

Abstract

This chapter deals with one promising line of generalization and synthesis which have been somewhat neglected by the main stream of trade theory. United States market offers certain unique kinds of opportunities to those who are in a position to be aware of them. First, United States market consists of consumers with an average income which is higher than that in any other national market — twice as high as that of Western Europe, for instance. Second, United States market is characterized by high unit labor costs and relatively unrationed capital compared with practically all other markets. This is a fact which conditions the demand for both consumer goods and industrial products. As the demand for a product expands, a certain degree of standardization usually takes place. This is not to say that efforts at product differentiation come to an end. On the contrary; such efforts may even intensify, as competitors try to avoid the full brunt of price competition.

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