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The Theory of International Trade The Theory of International Trade and Investment and Investment
Text by Profs. M. Czinkota, I. Ronkainen, Text by Profs. M. Czinkota, I. Ronkainen, and M. Moffettand M. MoffettMultimedia Presentation byMultimedia Presentation byProf. Milton PressleyProf. Milton PressleyThe University of New OrleansThe University of New Orleans
• To understand the traditional arguments of how To understand the traditional arguments of how and why international trade improves the welfare and why international trade improves the welfare of all countriesof all countries
• To review the history and compare the To review the history and compare the implications of trade theory from the original implications of trade theory from the original work of Adam Smith to the contemporary work of Adam Smith to the contemporary theories of Michael Portertheories of Michael Porter
• To examine the criticisms of classical trade theory To examine the criticisms of classical trade theory and examine alternative viewpoints of which and examine alternative viewpoints of which business and economic forces determine trade business and economic forces determine trade patterns between countriespatterns between countries
• To explore the similarities and distinctions To explore the similarities and distinctions between international trade and international between international trade and international investmentinvestment
Figure 5.1 – The Evolution of Trade TheoryFigure 5.1 – The Evolution of Trade TheoryFigure 5.1 – The Evolution of Trade TheoryFigure 5.1 – The Evolution of Trade Theory
Classical Trade TheoryClassical Trade TheoryClassical Trade TheoryClassical Trade Theory• The Theory of Absolute AdvantageThe Theory of Absolute Advantage
• Absolute AdvantageAbsolute Advantage• Division of LaborDivision of Labor
• The Theory of Comparative AdvantageThe Theory of Comparative Advantage• A Numerical Example of Classical TradeA Numerical Example of Classical Trade
Classical Trade TheoryClassical Trade TheoryClassical Trade TheoryClassical Trade Theory• National Production PossibilitiesNational Production Possibilities
• Production Possibilities FrontiersProduction Possibilities Frontiers
Figure 5.2 – Figure 5.2 – Production Production Possibility Frontiers, Possibility Frontiers, Specialization of Specialization of Production and the Production and the Benefits of TradeBenefits of Trade
Figure 5.2 – Figure 5.2 – Production Production Possibility Frontiers, Possibility Frontiers, Specialization of Specialization of Production and the Production and the Benefits of TradeBenefits of Trade
Figure 5.3 – Factor Proportions in ProductionFigure 5.3 – Factor Proportions in ProductionFigure 5.3 – Factor Proportions in ProductionFigure 5.3 – Factor Proportions in Production
International Investment and International Investment and Product Cycle TheoryProduct Cycle TheoryInternational Investment and International Investment and Product Cycle TheoryProduct Cycle Theory
• Product Cycle TheoryProduct Cycle Theory• The Stages of the Product CycleThe Stages of the Product Cycle
• Stage 1: The New ProductStage 1: The New Product• Stage 2: The Maturing ProductStage 2: The Maturing Product• Stage 3: The Standardized ProductStage 3: The Standardized Product
• Trade Implications of the Product CycleTrade Implications of the Product Cycle• Product Cycle TheoryProduct Cycle Theory
International Investment and International Investment and Product Cycle TheoryProduct Cycle TheoryInternational Investment and International Investment and Product Cycle TheoryProduct Cycle Theory• The Contributions of Product Cycle The Contributions of Product Cycle
The New Trade TheoryThe New Trade TheoryThe New Trade TheoryThe New Trade Theory• The Competitive Advantage of NationsThe Competitive Advantage of Nations
• Factor ConditionsFactor Conditions• Demand ConditionsDemand Conditions• Related and Supporting IndustriesRelated and Supporting Industries• Firm Strategy, Structure and RivalryFirm Strategy, Structure and Rivalry
Figure 5.5 – Determinants of National Competitive Figure 5.5 – Determinants of National Competitive Advantage: Porter’s DiamondAdvantage: Porter’s Diamond
Figure 5.5 – Determinants of National Competitive Figure 5.5 – Determinants of National Competitive Advantage: Porter’s DiamondAdvantage: Porter’s Diamond
The Theory of International The Theory of International InvestmentInvestmentThe Theory of International The Theory of International InvestmentInvestment• Foreign Direct InvestmentsForeign Direct Investments• The Foreign Direct Investment DecisionThe Foreign Direct Investment Decision
The Theory of International The Theory of International InvestmentInvestmentThe Theory of International The Theory of International InvestmentInvestment• The Theory of Foreign Direct InvestmentThe Theory of Foreign Direct Investment• Firms As SeekersFirms As Seekers
The Theory of International The Theory of International InvestmentInvestmentThe Theory of International The Theory of International InvestmentInvestment• Firms As Exploiters of ImperfectionsFirms As Exploiters of Imperfections
• Imperfections in AccessImperfections in Access• Import Substitution PoliciesImport Substitution Policies
• Imperfections in Factor MobilityImperfections in Factor Mobility• Imperfections in ManagementImperfections in Management
• Firms As InternalizersFirms As Internalizers• InternalizationInternalization