Net exports of a product
NX = production - consumption
The one calculation the product cycle needs. Apply it to the innovating country in each period: the sign tells you which side of the cycle the product is on, and the moment it turns negative is stage V.
- Production
- Units the country makes in the period
- Consumption
- Units the country uses in the period
- NX
- Net exports; positive is a net exporter, negative a net importer
World market clearing check
sum of production across nations = sum of consumption across nations
Use it to fill in a missing cell of a product cycle table, and to check your net export figures: in a two-country world one country's net exports must be the exact negative of the other's.
- Production
- Output of each nation in the period
- Consumption
- Use in each nation in the period
Time compression of the product cycle
Fall in the diffusion lag % = (old lag - new lag) / old lag x 100
To put a number on time compression. The same arithmetic measures how much of the innovator's temporary monopoly period has been lost.
- Old lag
- Years from introduction to displacement for an earlier product
- New lag
- Years for the recent product
Research and development intensity
R&D intensity = R&D expenditure / sales
Gruber, Mehta and Vernon's proxy for the temporary comparative advantage a firm or nation holds in new products. Always scale spending to size before comparing two firms or two countries.
- R&D expenditure
- Spending on research and development in the period
- Sales
- Turnover in the same period, in the same currency