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This phenomenon, discovered by Wassily Leontief initially, is known as the Leontief paradox and has been explained in terms of the quality of labour input rather than just labour-hours of work. Rugman and Collinson pointed out that they found the labour-intensive goods the US export required highly educated labour such as computer software and design work. The Leontief paradox shows the problems with factor proportion theory and helps us understand why no single theory can explain the role of economic factors in trade theory (Rugman&Collinson, 2009). Also, some countries have minimum wage laws that result in high prices for relatively abundant labour. This would affect the international trading of labour-intensive products as well. Obviously, Leontief theory defines the international trade more detailed. Not like factors proportion theory defining the trade into capital-intensive and labour-intensive goods exchange, the Leontief looks into the trades in deed. When one location has more resources in one specific area, it will choose to produce the goods which use this resource. For instance, although the US has less labour force than Malaysia, it has much more advanced and highly educated computer programmer than Malaysia. That is the reason why America exports software like Microsoft which is labour-intensive product
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The international product life cycle theory helps explain why a product that begins as a nation’s export often ends up becoming an import. The PCs first entered market in 1984 and were in the standardized product stage by 1995. When the personal computer first appeared in the market, only seldom company in the America can produce computers. But in recent years, dozens of companies produce computers. Today, the computers are replaced by even better machines with faster processors and more multimedia capabilities like laptops and tablet. Actually, when a product moves into standardized stage, the innovating country still participates in producing the goods. In PCs industry, less developed countries take part in the assemble process, and the developed country like the US do the design part which needs highly educated labour force. In deed the structure of international supply chain changed. Developed countriescontrolled the upper part of the supply chain and developing countries do the lower jobs in international supply chain. The product life cycle theory is useful in helping to explain how new technologically innovative products fit into the world trade picture (Kleeper, 1996). Because of rapid development of technology, it is important to remember that one or two versions of them may be in the standardized
The international product life cycle theory helps explain why a product that begins as a nation’s export often ends up becoming an import. The PCs first entered market in 1984 and were in the standardized product stage by 1995. When the personal computer first appeared in the market, only seldom company in the America can produce computers. But in recent years, dozens of companies produce computers. Today, the computers are replaced by even better machines with faster processors and more multimedia capabilities like laptops and tablet. Actually, when a product moves into standardized stage, the innovating country still participates in producing the goods. In PCs industry, less developed countries take part in the assemble process, and the developed country like the US do the design part which needs highly educated labour force. In deed the structure of international supply chain changed. Developed countriescontrolled the upper part of the supply chain and developing countries do the lower jobs in international supply chain. The product life cycle theory is useful in helping to explain how new technologically innovative products fit into the world trade picture (Kleeper, 1996). Because of rapid development of technology, it is important to remember that one or two versions of them may be in the standardized