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Industrial heterogeneity and international product cycles

Author

Listed:
  • Yuxiang Zou

    (Zhongnan University of Economics and Law)

  • Tai-Liang Chen

    (Zhongnan University of Economics and Law)

Abstract

This paper proposes a model of quality ladder in the context of North–South trade to examine the emergence of product cycles in industries of different research and development (R&D) intensity levels. To acquire the dominant advantage, firms as a whole can strategically undertake either quality upgrades through R&D or cost saving through the channels of market penetration—foreign direct investment (FDI) or offshoring. In an infinite-horizon game, the uses of mixing moving-up and moving-out strategies in high-tech and medium-tech industries generate product cycles. Furthermore, in low-tech industries, FDI is a strongly dominant strategy for the industry leaders and followers. Under certain conditions, firms leapfrog over each other and product cycles thus emerge.

Suggested Citation

  • Yuxiang Zou & Tai-Liang Chen, 2018. "Industrial heterogeneity and international product cycles," Journal of Economics, Springer, vol. 125(1), pages 1-25, September.
    • Handle: RePEc:kap:jeczfn:v:125:y:2018:i:1:d:10.1007_s00712-017-0586-9
    DOI: 10.1007/s00712-017-0586-9
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    References listed on IDEAS

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    1. Tetsugen Haruyama & Ken-ichi Hashimoto, 2020. "Innovators and imitators in a world economy," Journal of Economics, Springer, vol. 130(2), pages 157-186, July.

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    More about this item

    Keywords

    North–South trade; Industrial heterogeneity; Vertical innovation; Penetration channels; International product cycles;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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