INVESTMENT AND TRADE 193 development and use of the conveyor belt,the fork-lift truck and the automatic control system.It seems to follow that wherever there was a chance successfully to sell a new product responsive to the need to conserve labor,this chance would be apparent first to those in a position to observe the United States market. Assume,then,that entrepreneurs in the United States are first aware of opportunities to satisfy new wants associated with high income levels or high unit labor costs.Assume further that the evidence of an unfilled need and the hope of some kind of monopoly windfall for the early starter both are sufficiently strong to justify the initial investment that is usually involved in converting an ab- stract idea into a marketable product.Here we have a reason for expecting a consistently higher rate of expenditure on product development to be undertaken by United States producers than by producers in other countries,at least in lines which promise to sub- stitute capital for labor or which promise to satisfy high-income wants.Therefore,if United States firms spend more than their foreign counterparts on new product development (often mislead- ingly labeled "research"),this may be due not to some obscure sociological drive for innovation but to more effective communication between the potential market and the potential supplier of the mar- ket.This sort of explanation is consistent with the pioneer appear- ance in the United States (conflicting claims of the Soviet Union notwithstanding)of the sewing machine,the typewriter,the tractor, etc. At this point in the exposition,it is important once more to emphasize that the discussion so far relates only to innovation in certain kinds of products,namely to those associated with high income and those which substitute capital for labor.Our hypothesis says nothing about industrial innovation in general;this is a larger subject than we have tackled here.There are very few countries that have failed to introduce at least a few products;and there are some,such as Germany and Japan,which have been responsible for a considerable number of such introductions.Germany's outstand- ing successes in the development and use of plastics may have been due,for instance,to a traditional concern with her lack of a raw materials base,and a recognition that a market might exist in Germany for synthetic substitutes. 6.See two excellent studies:C.Freeman,"The Plastics Industry:A Comparative Study of Research and Innovation,"in National Institute Eco- momic Review,No.26 (Nov.1963),p.22 et seg.;G.C.Hufbauer,Sunthetic Materials and the Theory of International Trade (London:Gerald Duckworth, 1965).A number of links in the Hufbauer arguments are remarkably similar toINVESTMENT AND TRADE 193 development and use of the conveyor belt, the fork-lift truck and the automatic control system. It seems to follow that wherever there was a chance successfully to sell a new product responsive to the need to conserve labor, this chance would be apparent first to those in a position to observe the United States market. Assume, then, that entrepreneurs in the United States are first aware of opportunities to satisfy new wants associated with high income levels or high unit labor costs. Assume further that the evidence of an unfilled need and the hope of some kind of monopoly windfall for the early starter both are sufficiently strong to justify the initial investment that is usually involved in converting an ab￾stract idea into a marketable product. Here we have a reason for expecting a consistently higher rate of expenditure on product development to be undertaken by United States producers than by producers in other countries, at least in lines which promise to sub￾stitute capital for labor or which promise to satisfy high-income wants. Therefore, if United States firms spend more than their foreign counterparts on new product development (often mislead￾ingly labeled "research"), this may be due not to some obscure sociological drive for innovation but to more effective communication between the potential market and the potential supplier of the mar￾ket. This sort of explanation is consistent with the pioneer appear￾ance in the United States (conflicting claims of the Soviet Union notwithstanding) of the sewing machine, the typewriter, the tractor, etc. At this point in the exposition, it is important once more to emphasize that the discussion so far relates only to innovation in certain kinds of products, namely to those associated with high income and those which substitute capital for labor. Our hypothesis says nothing about industrial innovation in general; this is a larger subject than we have tackled here. There are very few countries that have failed to introduce at least a few products; and there are some, such as Germany and Japan, which have been responsible for a considerable number of such introductions. Germany's outstand￾ing successes in the development and use of plastics may have been due, for instance, to a traditional concern with her lack of a raw materials base, and a recognition that a market might exist in Germany for synthetic substitute^.^ 6. See two excellent studies: C. Freeman, "The Plastics Industry: A Comparative Study of Research and Innovation," in National Institute Eco￾nomic Review, No. 26 (Nov. 1963), p. 22 et seq.; G. C. Hufbauer, Synthetic Materials and the Theory of International Trade (London: Gerald Duckworth, 1965). A number of links in the Hufbauer arguments are remarkably similar to