Economics (Multinational firms. FDI) Question1: With respect to innovation and transfer of
technology between Home and Host industries, compare and contrast views advanced by Vernon
and Kruman.
Solution
The pattern of world trade and the trends in such changes over time is gretly determined by the
technological innovation in developed countries (also refered as home countries) and transfer of
technology in less developed countries (also reffered as host countries).
The spread of production and technological advancement which results in world trade pattern is
backed up many theories in literature. One of the thoeory is of Vernon, in which decision to
locate production in foreign countries is studied through life cycle model. He linked the location
of production activities to the stages of life cycyle of a product, hypothising that new product
because of their higher knowledge intensity, would be produced in North, which has a relative
abundabce of skill labor and therefore a comparative advantage occurs in their prodcution. For a
while, when the product has become standard and popular, technology transfer to the South or
Southern firms.
HMCS Vancouver Pre-Deployment Brief - May 2024 (Web Version).pptx
Economics (Multinational firms. FDI) Question1 With respect to innov.pdf
1. Economics (Multinational firms. FDI) Question1: With respect to innovation and transfer of
technology between Home and Host industries, compare and contrast views advanced by Vernon
and Kruman.
Solution
The pattern of world trade and the trends in such changes over time is gretly determined by the
technological innovation in developed countries (also refered as home countries) and transfer of
technology in less developed countries (also reffered as host countries).
The spread of production and technological advancement which results in world trade pattern is
backed up many theories in literature. One of the thoeory is of Vernon, in which decision to
locate production in foreign countries is studied through life cycle model. He linked the location
of production activities to the stages of life cycyle of a product, hypothising that new product
because of their higher knowledge intensity, would be produced in North, which has a relative
abundabce of skill labor and therefore a comparative advantage occurs in their prodcution. For a
while, when the product has become standard and popular, technology transfer to the South or
Southern firms
