Product Life Cycle Theory
Patrick Kuntara Harpranata Silangit
12/327016/EK/18732
Economics
Product Life Cycle (PLC) Theory:
(Answering the Failure of H-O Theory)
By Endang Sih Prapti
Summary
Abstract
One of the hypotheses that were existed in the world about the trading of goods and service is called the H-O; the theory said that the international trading would only happen inside countries that have different resources; Labor rich country will trade with capital rich country. However, the theory is not really working on the international trade, 60% of the trading volume in the world only happens with the developed country which rich of the same input which is capital. Therefore, because the H-O theory is not effective then it appears a new theory called the product life cycle. This product life cycle does not only explain about why the international trading dominated by the trading between the developed countries, but also explains about the background of emergence the multinational corporation.
Transformation from H-O theory to PLC theory
Improvement of a theory is on the improvement of the assumption. H-O theory is still a comparative statistical international trade which almost all variable is considered as exogenous or fixed (the changing is specified outside the model). It made there is a tendency that discussing international trade is just talked around assumption. In reality a lot of variable in H-O theory had changed in endogenous model, so it cannot be generally applied. It can only represent trading between labor-rich country and capital-rich country which only 40% of international trading volume. Further this theory weakness gives the opportunity of emergence of new international trade that can also represent another 60% of international trade in developed country, which is PLC theory. The new theory uses dynamic variable as driving motives of international trade and also can explains about the background of emergence the multinational corporation.
Dynamic
12/327016/EK/18732
Economics
Product Life Cycle (PLC) Theory:
(Answering the Failure of H-O Theory)
By Endang Sih Prapti
Summary
Abstract
One of the hypotheses that were existed in the world about the trading of goods and service is called the H-O; the theory said that the international trading would only happen inside countries that have different resources; Labor rich country will trade with capital rich country. However, the theory is not really working on the international trade, 60% of the trading volume in the world only happens with the developed country which rich of the same input which is capital. Therefore, because the H-O theory is not effective then it appears a new theory called the product life cycle. This product life cycle does not only explain about why the international trading dominated by the trading between the developed countries, but also explains about the background of emergence the multinational corporation.
Transformation from H-O theory to PLC theory
Improvement of a theory is on the improvement of the assumption. H-O theory is still a comparative statistical international trade which almost all variable is considered as exogenous or fixed (the changing is specified outside the model). It made there is a tendency that discussing international trade is just talked around assumption. In reality a lot of variable in H-O theory had changed in endogenous model, so it cannot be generally applied. It can only represent trading between labor-rich country and capital-rich country which only 40% of international trading volume. Further this theory weakness gives the opportunity of emergence of new international trade that can also represent another 60% of international trade in developed country, which is PLC theory. The new theory uses dynamic variable as driving motives of international trade and also can explains about the background of emergence the multinational corporation.
Dynamic