THE PRODUCT CYCLE HYPOTHESIS IN A NEW INTERNATIONAL ENVIRONMENT 261 uninformed about conditions in foreign markets,whether in other advanced countries or in the developing world.Nor can it be assumed that US firms are exposed to a very different home environment from European and Japanese firms; although the gap between most of the developing countries and the advanced industrialized countries palpably remains,the differences among the advanced industrialized countries are reduced to trivial dimensions.With some key assumptions of the product cycle hypothesis in doubt,what organizing concepts are still available by which one can observe and assess the role of innovation in the operations of the multinational enterprises of different countries? The Global Network in Operation To try to answer the question,I have classified multinational companies crudely into three ideal types,and have sought to explore their likely behaviour. The first type is purely hypothetical,a result of armchair speculation.Picture an MNC with an innovating capability that has developed a powerful capacity for global scanning.Communication is virtually costless between any two points of the globe;information,once received,is digested and interpreted at little or no cost.Ignorance or uncertainty,therefore,is no longer a function of distance; markets,wherever located,have an equal opportunity to stimulate the firm to innovation and production;and factory sites,wherever located,have an equal chance to be weighed for their costs and risks.But some significant economies of scale continue to exist in the development activities as well as in the production activities of the firm. An enterprise of this sort,we can presume,will from time to time develop an innovation in response to the promise or threat of one of the many markets to which it was exposed.The firm might launch the innovative process in the market that had produced the stimulus;or,if economies of scale were important and an appropriate facility existed elsewhere in the system,in a location well removed from the prospective market.In either case,once the innovation was developed, the global scanner would be in a position to serve any market in which it was aware that demand existed;and would be in a position to detect and serve new demands in other markets as they subsequently arose.Presumably such demands would grow in other countries as they attained the income levels or the factor cost configurations of the country whose needs had first stimulated the invention.For some products,such as consumer goods,the demand in different national markets could be expected to appear in a predictable pecking order,based largely on income levels and labour costs. The global scanner,therefore,would be in an advantageous position as compared with those firms without such a scanning capability.Firms that were confined to a country which was down the ladder in the pecking order,including most firms headquartered in the developing countries,would be at a disadvantage in relation to the global scanner.As the incomes of their home countries grew,the nonglobal producers might well perceive the opportunity to fill a growing demand; but they would be handicapped by comparison with the enterprises that were already producing in the higher income countries,including the global scanners.THE PRODUCT CYCLE HYPOTHESIS IN A NEW INTERNATIONAL ENVIRONMENT 261 uninformed about Conditions ifl foreign markets, whether in other advanced countries or in the developing world. Nor can it be assumed that US firms are exposed to a very different home environment from European and Japanese firms; although the gap between most of the developing countries and the advanced industrialized countries palpably remains, the differences among the advanced industrialized countries are reduced to trivial dimensions. With some key assumptions of the product cycle hypothesis in doubt, what organizing concepts are still available by which one can observe and assess the role of innovation in the operations of the multinational enterprises of different countries? The Global Network in Operation To try to answer the question, I have classified multinational companies crudely into three ideal types, and have sought to explore their likely behaviour. The first type is purely hypothetical, a result of armchair speculation. Picture an MNC with an innovating capability that has developed a powerful capacity for global scanning. Communication is virtually costless between any two points of the globe; information, once received, is digested and interpreted at little or no cost. Ignorance or uncertainty, therefore, is no longer a function of distance; markets, wherever located, have an equal opportunity to stimulate the firm to innovation and production; and factory sites, wherever located, have an equal chance to be weighed for their costs and risks. But some significant economies of scale continue to exist in the development activities as well as in the production activities of the firm. An enterprise of this sort, we can presume, will from time to time develop an innovation in response to the promise or threat of one of the many markets to which it was exposed. The firm might launch the innovative process in the market that had produced the stimulus; or, if economies of scale were important and an appropriate facility existed elsewhere in the system, in a location well removed from the prospective market. In either case, once the innovation was developed, the global scanner would be in a position to serve any market in which it was aware that demand existed; and would be in a position to detect and serve new demands in other markets as they subsequently arose. Presumably such demands would grow in other countries as they attained the income levels or the factor cost configurations of the country whose needs had first stimulated the invention. For some products, such as consumer goods, the demand in different national markets could be expected to appear in a predictable pecking order, based largely on income levels and labour costs. The global scanner, therefore, would be in an advantageous position as compared with those firms without such a scanning capability. Firms that were confined to a country which was down the ladder in the pecking order, including most firms headquartered in the developing countries, would be at a disadvantage in relation to the global scanner. As the incomes of their home countries grew, the nonglobal producers might well perceive the opportunity to fill a growing demand; but they would be handicapped by comparison with the enterprises that were already producing in the higher income countries, including the global scanners