Trade Theories

Subdecks (5)

Cards (55)

  • exhibit 5.1: arranges leading theories of international trade and investment into two groups - nation level theories and firm level theories
  • nation level theories are classical theories, widely accepted since the 18th century
  • nation level theories address two questions:
    1. why do nations trade?
    2. how can nations enhance competitive advantage?
  • firm level theories are contemporary theories of how firms can create and sustain superior organizational performance
  • firm level theories address two questions:
    1. why and how do firms internationalize?
    2. how can internationalizing firms gain and sustain competitive advantage?
  • even resource rich countries such as the United States would suffer greatly without trade
  • without trade, coffee and sugar would be luxury items
  • without trade, petroleum based energy sources would dwindle
  • without trade, vehicles would stop running, freight would go undelivered, and people wouldn't be able to heat their homes
  • modern life would be nearly impossible without trade
  • six classical perspectives help explain the underlying rationale for trade among nations:
    1. mercantilism
    2. absolute advantage principle
    3. comparative advantage principle
    4. factor proportions theory and the Leontief Paradox
    5. international product life cycle theory
    6. new trade theory