Geography Reference
In-Depth Information
US. This observation stems from the earlier work of Vernon on agglom-
eration economies in metropolitan regions such as New York (Vernon
1957, 1960). In this work he stresses that among the main causes underly-
ing the growth of the core urban areas is the availability of a variety of
business services, which previously were provided internally by the firm's
business functions (Vernon 1957, p. 17). In mature oligopolies, advantages
based on economies of scale, transport and marketing lead to a strong
concentration of investment either in the home country of the MNE, or
in similarly advanced economies. During this growth stage, when the
number of competitors is increasing and firms are concerned with control-
ling their production costs, the location of the firm's investments spreads
out of the initial agglomerations. Foreign production starts in countries
where demand conditions are similar, and the restructuring process itself
can lead to improvements in the original innovative product. In price com-
petitive oligopolies, low cost locations in less developed countries become
particularly attractive (Vernon 1966, 1974, 1979b). Thus, the mature or
standardized stage of the product cycle, which is characterized by stable
technology, long production runs, strong price competition and an inten-
sity of unskilled labour, offers less developed countries the opportunity to
successfully enter the international competitive environment by attracting
MNEs of advanced economies into their developing local industries (see
also Hirsch 1967).
The product cycle model has also seen wide applications in regional
and urban analysis, basically predicting that the concentration of early
stages of product development will be in urban areas, where high-skilled
labour, external economies and top management are easily available, fol-
lowed by subsequent shifts of standardized production to more rural and
lower costs regions (Norton and Rees 1979). However, in this literature
the structural and technological aspects of Vernon's arguments as they
relate to MNEs are largely ignored. On the other hand, the same simplistic
skilled-unskilled dichotomy of the international product cycle model is
frequently applied also at the sub-national scale, thereby attracting criti-
cism that these approaches have mainly failed to explain the processes of
historical change in industry organization and spatial behaviour (e.g.,
Storper 1985; Taylor 1986, 1987; Mack and Schaeffer 1993). Among the
criticisms of the PLC type of behaviour, two in particular seem to be most
relevant for our purpose here. Firstly, the models tend to display a simpli-
fied and deterministic view of the innovation process, which is assumed to
be a linear and uniform sequence from invention to a marketable product
to standardization. Secondly, the locational issues arising in each of the
stages of the product cycle model following the introduction of the new
product have been disregarded. In many PLC models the spatial determi-