Which theory suggests that as products mature the optimal production location will change?

Abstract

This paper evaluates current theories of the relationship between population change and the environment, particularly land use, in developing countries. Specifically, this paper critically reviews the literature and suggests what demographers can contribute to testing these theories. The literature can be divided into four main theoretical frameworks. Population growth plays a different role in each of these theories. (1) For the neoclassical economists, high population growth is a neutral factor; it has no intrinsic effect on the environment. How population growth affects the environment depends on whether free market policies are operative. In an efficient market, population growth can serve to induce innovation and the development of advanced technologies. In an economy full of distortions, high population growth can exacerbate the effects of these distortions. (2) For the classical economists or natural scientists, high population growth is the independent factor causing environmental degradation. As an increasing population puts pressure on fixed available resources to maintain or increase the population's standard of living, environmental degradation occurs as resources are depleted. Empirical work has generally centered on estimating the carrying capacity of land to determine what size population can be supported, given available resources. (3) For many dependency theorists, high population growth is a symptom of a deeper problem, poverty. Environmental degradation and high population growth are linked, not in that one causes the other, but in that their root cause is the same: unequal distribution of resources maintained by distorted political and economic relations.

Journal Information

This journal publishes scientific articles and reviews related to the bi-directional links between population, natural resources, and the natural environment. Its purpose in doing so is to deepen scientific and policy dialogue in this area, which is often complex. As the area is of interest to many disciplines, contributions from a range of social, policy, life, and natural sciences are encouraged. Work at all scales, local to global, is welcome as are both theoretical and empirical contributions. Papers involving mathematics are appropriate so long as the symbolic argument is clearly described in the narrative text. Submissions devoted largely to expressing a political view will be considered so long as they are clearly labeled "Commentary". The editor reserves the right to solicit and oppose to any such piece a contrary view. Population and Environment is aimed at researchers working in academic and policy institutions in the fields of demography, economics, sociology, geography, environmental studies, public health, ecology and associated sub-disciplines.

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The International Product Life Cycle Theory was authored by Raymond Vernon in the 1960s to explain the cycle that products go through when exposed to an international market. The cycle describes how a product matures and declines as a result of internationalization. There are three stages contained within the theory.

New Product Introduction

The cycle always begins with the introduction of a new product. In this stage a corporation in a developed country will innovate a new product. The market for this product will be small and sales will be relatively low as a result. Vernon deduced that innovative products are more likely to be created in a developed nation because the buoyant economy means that people have more disposable income to use on new products.

To offset the impact of low sales, corporations will keep the manufacture of the product local, so that as process issues arise or a need to modify the product in its infancy stage presents itself, changes can be implemented without too much risk and without wasting time.

As sales increase, corporations may start to export the product out to other developed nations to increase sales and revenue. It’s a straightforward step towards the internationalization of a product because the appetites of people within developed nations tends to be quite similar.

The Maturity Stage

At this point, when the product has firmly established demand in developed countries, the manufacturer of the product will need to consider opening up production plants locally in each developed country to meet the demand. As the product is being produced locally, labor costs and export and costs will decrease thereby reducing the unit cost and increasing revenue. Product development can still occur at this point as there is still room to adapt and modify the product if needed. Appetites for the product in developed nations will continue to increase in this stage.

Although the unit costs have decreased due to the decision to produce the product locally, the manufacture of the product will still require a highly skilled labor force. Local competition to offer alternatives start to form. The increased product exposure begins to reach the countries that have a less developed economy, and demand from these nations start to grow.

Product Standardization and Streamlining of Manufacturing

Exports to nations with a less developed economy begin in earnest. Competitive product offers saturate the market which means that the original purveyor of the product loses their competitive edge on the basis of innovation. In response to this, rather than continuing to add new features to the product, the corporation focuses on driving down the cost of the process to manufacture the product. They do this by moving production to nations where the average income is much lower and standardizing and streamlining the manufacturing methods needed to make the product.

The local workforce in lower income nations are then exposed to the technology and methods to make the product and competitors begin to rise as they did in developed nations previously. Meanwhile, demand in the original nation where the product came from begins to decline and eventually dwindles as a new product grabs the attention of the people. The market for the product is now completely saturated and the multinational corporation leaves the manufacture of the product in low income countries and instead, focuses its attention on new product development as it bows gracefully out of the market.

What is left of the market share is divvied up between predominantly foreign competitors and people in the original country who want the product at this point, will most likely buy an imported version of the product from a nation where the incomes are lower. Then the cycle begins again.

Which theory suggests that in cases where there may be important first mover advantages governments can help firms from their countries attain these advantages?

What is country similarity theory?

What is Ricardo's theory of comparative advantage?

Which theory suggests that comparative advantage arises from differences in national factor endowments?