INTERNATIONAL INVESTMENT AND INTERNATIONAL TRADE IN THE PRODUCT CYCLE RAYMOND VERNON Location of new products,191.-The maturing product,196.-The standardized product,202. Anyone who has sought to understand the shifts in internation- al trade and international investment over the past twenty years has chafed from time to time under an acute sense of the inadequacy of the available analytical tools.While the comparative cost con- cept and other basic concepts have rarely failed to provide some help,they have usually carried the analyst only a very little way toward adequate understanding.For the most part,it has been necessary to formulate new concepts in order to explore issues such as the strengths and limitations of import substitution in the de- velopment process,the implications of common market arrange- ments for trade and investment,the underlying reasons for the Leontief paradox,and other critical issues of the day. As theorists have groped for some more efficient tools,there has been a flowering in international trade and capital theory.But the very proliferation of theory has increased the urgency of the search for unifying concepts.It is doubtful that we shall find many prop- ositions that can match the simplicity,power,and universality of application of the theory of comparative advantage and the inter- national equilibrating mechanism;but unless the search for better tools goes on,the usefulness of economic theory for the solution of problems in international trade and capital movements will probably decline. The present paper deals with one promising line of generaliza- tion and synthesis which seems to me to have been somewhat neg- lected by the main stream of trade theory.It puts less emphasis upon comparative cost doctrine and more upon the timing of in- novation,the effects of scale economies,and the roles of ignorance and uncertainty in influencing trade patterns.It is an approach The preparation of this article was financed in part by a grant from the Ford Foundation to the Harvard Business School to support a study of the implications of United States foreign direct investment.This paper is a by- product of the hypothesis-building stage of the study.INTERNATIONAL INVESTMENT AND INTERNATIONAL TRADE IN THE PRODUCT CYCLE * Location of new products, 191.-The maturing product, 196.-The standardized product, 202. Anyone who has sought to understand the shifts in internation￾al trade and international investment over the past twenty years has chafed from time to time under an acute sense of the inadequacy of the available analytical tools. While the comparative cost con￾cept and other basic concepts have rarely failed to provide some help, they have usually carried the analyst only a very little way toward adequate understanding. For the most part, it has been necessary to formulate new concepts in order to explore issues such as the strengths and limitations of import substitution in the de￾velopment process, the implications of common market arrange￾ments for trade and investment, the underlying reasons for the Leontief paradox, and other critical issues of the day. As theorists have groped for some more efficient tools, there has been a flowering in international trade and capital theory. But the very proliferation of theory has increased the urgency of the search for unifying concepts. It is doubtful that we shall find many prop￾ositions that can match the simplicity, power, and universality of application of the theory of comparative advantage and the inter￾national equilibrating mechanism; but unless the search for better tools goes on, the usefulness of economic theory for the solution of problems in international trade and capital movements will probably decline. The present paper deals with one promising line of generaliza￾tion and synthesis which seems to me to have been somewhat neg￾lected by the main stream of trade theory. It puts less emphasis upon comparative cost doctrine and more upon the timing of in￾novation, the effects of scale economies, and the roles of ignorance and uncertainty in influencing trade patterns. It is an approach * The preparation of this article was financed in part by a grant from the Ford Foundation to the Harvard Business School to support a study of the implications of United States foreign direct investment. This paper is a by- product of the hypothesis-building stage of the study