INVESTMENT AND TRADE 197 mass market may be located in the United States,some demand for the product begins almost at once to appear elsewhere.For instance, although heavy fork-lift trucks in general may have a comparative- ly small market in Spain because of the relative cheapness of un- skilled labor in that country,some limited demand for the product will appear there almost as soon as the existence of the product is known. If the product has a high income elasticity of demand or if it is a satisfactory substitute for high-cost labor,the demand in time will begin to grow quite rapidly in relatively advanced countries such as those of Western Europe.Once the market expands in such an advanced country,entrepreneurs will begin to ask themselves whether the time has come to take the risk of setting up a local producing facility. How long does it take to reach this stage?An adequate answer must surely be a complex one.Producers located in the United States,weighing the wisdom of setting up a new production facility in the importing country,will feel obliged to balance a number of complex considerations.As long as the marginal production cost plus the transport cost of the goods exported from the United States is lower than the average cost of prospective production in the market of import,United States producers will presumably prefer to avoid an investment.But that calculation depends on the producer's ability to project the cost of production in a market in which factor costs and the appropriate technology differ from those at home. Now and again,the locational force which determined some particular overseas investment is so simple and so powerful that one has little difficulty in identifying it.Otis Elevator's early pro- liferation of production facilities abroad was quite patently a func- tion of the high cost of shipping assembled elevator cabins to distant locations and the limited scale advantages involved in manufactur- ing elevator cabins at a single location.5 Singer's decision to invest in Scotland as early as 1867 was also based on considerations of a sort sympathetic with our hypothesis.It is not unlikely that the 4.M.V.Posner,"International Trade and Technical Change,"Ozford Economic Papers,Vol.13 (Oct.1961),p.323,et seq.presents a stimulating model purporting to explain such familiar trade phenomena as the exchange of machine tools between the United Kingdom and Germany.In the process he offers some particularly helpful notions concerning the size of the "imita- tion lag"in the responses of competing nations. 5.Dudley M.Phelps,Migration of Industry to South America (New York:MeGraw-Hill,1963),p.4. 6.John H.Dunning,American Investment in British Manufacturing Industry (London:George Allen Unwin,1958),p.18.The Dunning bookINVESTMENT AND TRADE 197 mass market may be located in the United States, some demand for the product begins almost at once to appear elsewhere. For instance, although heavy fork-lift trucks in general may have a comparative￾ly small market in Spain because of the relative cheapness of un￾skilled labor in that country, some limited demand for the product will appear there almost as soon as the existence of the product is known. If the product has a high income elasticity of demand or if it is a satisfactory substitute for high-cost labor, the demand in time will begin to grow quite rapidly in relatively advanced countries such as those of Western Europe. Once the market expands in such an advanced country, entrepreneurs will begin to ask themselves whether the time has come to take the risk of setting up a local producing facility .4 How long does it take to reach this stage? An adequate answer must surely be a complex one. Producers located in the United States, weighing the wisdom of setting up a new production facility in the importing country, will feel obliged to balance a number of complex considerations. As long as the marginal production cost plus the transport cost of the goods exported from the United States is lower than the average cost of prospective production in the market of import, United States producers will presumably prefer to avoid an investment. But that calculation depends on the producer's ability to project the cost of production in a market in which factor costs and the appropriate technology differ from those at home. Now and again, the locational force which determined some particular overseas investment is so simple and so powerful that one has little difficulty in identifying it. Otis Elevator's early pro￾liferation of production facilities abroad was quite patently a func￾tion of the high cost of shipping assembled elevator cabins to distant locations and the limited scale advantages involved in manufactur￾ing elevator cabins at a single locati~n.~ Singer's decision to invest in Scotland as early as 1867 was also based on considerations of a sort sympathetic with our hypothe~is.~ It is not unlikely that the 4. M. V. Posner, "International Trade and Technical Change," Oxford Economic Papers, Vol. 13 (Oct. 19611, p. 323, et seq. presents a stimulating model purporting to explain such familiar trade phenomena as the exchange of machine tools between the United Kingdom and Germany. In the process he offers some particularly helpful notions concerning the size of the "imita￾tion lag" in the responses of competing nations. 5. Dudley M. Phelps, Migration of Industry to South America (New York: McGraw-Hill, 1963), p. 4. 6. John H. Dunning, American Investment in British Manufacturing Industry (London: George Allen & Unwin, 19581, p. 18. The Dunning book