International product life cycles, trade and development stages

Abstract

In this paper we first propose a proxy for early stage activity in a country's exports based on product life cycle theory. Employing a conditional latent class model, we then examine the relationship between this measure and economic growth for 93 countries during the period 1988-2005. We find that the impact of early stage activity differs across three clusters of countries. And we find that GDP levels can predict the cluster and the sign of the coefficient in a non-linear manner. In the richest countries, exporting products that are in an early stage of their product life cycle is associated with higher growth rates. In contrast, we find a cluster of middle income countries with high growth rates that grow faster by exporting more mature products that are in the later stages of their life cycle. Finally, early stage activity has no significant impact on growth in the cluster of the poorest, developing countries. Countries in early stages of development should focus on acquiring market share in mature markets with routine technologies whereas emerging economies face the challenge of at some point switching from copying mature to inventing new products as they approach the global technology frontier. At that frontier they must join the advanced economies who specialise in early stage innovative products to stay ahead of increasing competition from abroad.

The Entrepreneurial Society

“…European universities already pay lip service to excellence (Vogel 2006;Corradi 2009;Hallonsten and Silander 2012;Wolfensberger 2015), but the reality is that few of them rank among the top universities globally. 5 Europe's strategy of providing a high-quality university education to the average student worked very well in the age of "the managed society" (Audretsch and Thurik 2000) when the rapid adoption of new knowledge in multinational industrial firms was sufficient to maintain a viable competitive position (Acemoglu et al 2006;Audretsch et al 2017). Following the rise of Asia, this strategy must now be complemented with policies allowing Europe's best and brightest to excel.…”

The Industry Life Cycle in an Economic Downturn: Lessons from Firm’s Behavior in Spain, 2007–2012

“…Maturity in homeland market is a key driver of internationalization (Vernon 1966) as firms' can extract additional advantage of slack resources and knowledge, trading standardized, globalized merchandises (Levitt 1983). Even more, while the exposition to international trade gives additional knowledge to improve and refine existing products (O'Sullivan 2020), increasing their appealing to the homeland or international market, the weight of country exports in the global trade and its link to national growth can be related with the phase of ILC (Audretsch et al 2017;Dieli 2020). 1 Among other effects, the initial model is refined by the consideration of the impact of technology (Klepper 1997) and, at a later stage, of the effect of disruptive innovation (Christensen and Raynor 2003).…”

“…Industry evolution thresholds can be placed in the demand side, from industry outcome (Harrigan 1980 ) or from consumption (Hammermesh and Silk 1979 ). In the supply side, changes among phases consider industry shipments (Audretsch et al 2017 ), the number and evolution of firms (shakeouts, Klepper 1996 ) or the number of innovations (McGahan and Silverman 2001 ). In this research we have used, and suggest for subsequent studies, the consumption indicator.…”

Consumer Fad Dynamic: the consumer behavior and the Gin case

“…The decline stage is inevitable, because the need for product disappears or, due to increased competition, there is a better/cheaper product that provides the same satisfaction. Once the production costs are higher in the developed countries and the product is standardized, the less developed countries start exporting the goods for the developed ones (Vernon, 1966;Achinivu et al, 2017;Audretsch et al, 2017).…”