THE PRODUCT CYCLE HYPOTHESIS IN A NEW INTERNATIONAL ENVIRONMENT 263 locations.To reduce their development costs and to respond to the pressures of various governments in whose territories they hope to do business,firms in this category are commonly prepared to establish some carefully selected development activities at distant points;but integration at the centre is still needed.is Firms in this category also have a strong need to integrate their global production facilities.Seeking to exploit scale economies,they are likely to establish various component plants in bothadvanced industrialized countries and developing countries,and to crosshaul between plants for the assembly of final products.That pattern will be at variance with product cycle expectations. It need not be anticipated,however,that all firms with a capacity for global scanning will commit themselves unequivocally to the development of standard global products such as the IBM 370,the Boeing 757,or the GM world car.General Motors,after all,continues to respond to certain distinctive national characteristics in some of its product lines,in spite of its commitment to a world sourcing strategy.Other automobile firms,including Renault and Chrysler,seem prepared to respond to national factors for even a larger proportion of their output,foregoing the advantages of a world product and long production runs.In computers,a number of IBM's rivals survive by their willingness and ability to adapt to the requirements of local markets,including the requirements of national governments to a degree that would be incompatible with the standardization of their products and the global rationalization of their facilities.16 Many European and Japanese firms still find it useful to treat the US market as a distinctive entity,justifying distinctive products and strategies. Accordingly,we can picture firms that make different decisions on the benefits of global optimization,according to the characteristics of each product line.And we can picture markets in which different firms have settled on somewhat different strategies for closely competing products.If past history is any guide,such differences can persist in a given product market over extended periods of time.18 A third type of innovating MNC that merits some speculative consideration is the firm whose choices of innovations and production sites remain myopically oriented to the home market while leaving all analysis of foreign markets to its individual foreign producing subsidiaries.Firms in this category simply put out their home-based innovations for production by their foreign subsidiaries;or, perhaps even more commonly,such firms allow the initiative for such decisions to 15 Compare the observations of Sanjaya Lall.'The International Allocation of Research Activity by U.S.Multinationals',in this issue. 16 This point is being developed in detail by Yves Doz at the Harvard Business School. 7 For evidence on Japanese firms in this category,see Terutomo Ozawa,Japan's Technological Challenge to the West,1950-1974 (Cambridge:MIT Press,1974).pp.97-98. s This proposition is of course consistent with the theory of strategic groups:see R.E.Caves and M. E.Porter,From Entry Barriers to Mobility Barriers:Conjectural Decisions and Contrived Deterrence to New Competition',Ouarterly Journal of Economics,vol.XCI,no.2,1977,pp.241-261.It is consistent also with the long established observation that different geographical locations offer different combinations of benefits and costs such that widely separated locations applying different production techniques may be competitive for sustained periods.See Max Hall,Made in Ne York (Cambridge: Harvard University Press,1959).THE PRODUCT CYCLE HYPOTHESIS IN A NEW INTERNATIONAL ENVIRONMENT 263 locations. To reduce their development costs and to respond to the pressures of various governments in whose territories they hope to do business, firms in this category are commonly prepared to establish some carefully selected development activities at distant points; but integration at the centre is still needed.'5 Firms in this category also have a strong need to integrate their global production facilities. Seeking to exploit scale economies, they are likely to establish various component plants in both advanced industrialized countries and developing countries, and to crosshaul between plants for the assembly of final products. That pattern will be at variance with product cycle expectations. It need not be anticipated, however, that all firms with a capacity for global scanning will commit themselves unequivocally to the development of standard global products such as the IBM 370, the Boeing 757, or the GM world car. General Motors, after all, continues to respond to certain distinctive national characteristics in some of its product lines, in spite of its commitment to a world sourcing strategy. Other automobile firms, including Renault and Chrysler, seem prepared to respond to national factors for even a larger proportion of their output, foregoing the advantages of a world product and long production runs. In computers, a number of IBM's rivals survive by their willingness and ability to adapt to the requirements of local markets, including the requirements of national governments, to a degree that would be incompatible with the standardization of their products and the global rationalization of their facilities.'6 Many European and Japanese firms still find it useful to treat the US market as a distinctive entity, justifying distinctive products and strategies.'7 Accordingly, we can picture firms that make different decisions on the benefits of global optimization, according to the characteristics of each product line. And we can picture markets in which different firms have settled on somewhat different strategies for closely competing products. If past history is any guide, such differences can persist in a given product market over extended periods of time.'8 A third type of innovating MNC that merits some speculative consideration is the firm whose choices of innovations and production sites remain myopically oriented to the home market while leaving all analysis of foreign markets to its individual foreign producing subsidiaries. Firms in this category simply put out their home-based innovations for production by their foreign subsidiaries; or, perhaps even more commonly, such firms allow the initiative for such decisions to ' Compare the observations of Sanjaya Lau, The International Allocation of Research Activity by U.S. Multinationals', in this issue. 16 This point is being developed in detail by Yves Doz at the Harvard Business School. 17 For evidence on Japanese firms in this category, see Terutomo Ozawa, Japan's Technological Chellenge to the West, 1950-1974 (Cambridge: MIT Press, 1974), pp. 97-98. IS This proposition is of course consistent with the theory of strategic groups; see R. E. Caves and M. E. Porter, 'From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition', Quarterly journal of Economics, vol. XCI, no.2, 1977, pp. 241-261. It is consistent also with the long established observation that different geographical locations offer different combinations of benefits and costs such that widely separated locations applying different production techniques may be competitive for sustained periods. See Max Hall, Made in New York (Cambridge: Harvard University Press, 1959)