International Business, 2nd Edition by Pearson

International Trade Theories  55

attain a monopoly. Thus, firms in the same industry but from dierent countries produce dierentiated

products, which become the basis of intra-industry trade creating a larger market for goods and allowing

better utilization of internal economies of scale. The theory is along the same lines as Linder’s income-

preference similarity theory and finds empirical support in industries such as automobiles, speciality

chemicals and wine, and explains the high proportion of intra-industry trade in overall international trade.

First Mover Advantage

This explanation of trade emphasizes the economic and strategic benefits to ...