of gaining and losing comparative advantages for specific countries in specific industries. In particular, it does not provide any clear explanation of the reasons why, during the past thirty years, the specialization pattern of Japanese industrial structure shifted from textile to steel and then to electronics industry, or why the development of the same industries was initially experienced by Japan and then transmitted firstly to the Asian NIEs (Newly Industrializing Economies) and lately to the ASEAN4 countries $ ^{1} $ .

### 1.2 The Product Cycle Theories

The analysis of the interactions between the process of industrial development and the pattern of trade, according to each country’s evolving structure of comparative advantages, is the core of the “product cycle” theories. Presenting a dynamic explanation of the changes in the pattern of specialization, these theories are able to overcome the limits of the neoclassical approach and offer a good analytical framework for the problem of the transmission of industrial development from a more advanced country to a less developed one.

In particular, two different hypothesis have contributed to this purpose: the “Product Cycle” (PC) theory and the “Catching-up Product Cycle” (CPC) theory $ ^{2} $ . Their common message is that, under the assumption of a sequence of product development stages with different technology requirements, a more advanced country will enjoy comparative advantages in the innovative industries, while a less developed country will specialize in the standardized ones. The pattern of trade with the less developed country will then show the more advanced one to export technology and skill-intensive products and import mature, unskilled labor-intensive goods. Such a kind of international division of labor will occur not only between different industries. It will also depend on the various production stages of the manufacturing process inside a same industry: each stage will be relocated to different countries according to the structure of comparative advantages they offer. At the same time, as the effect of learning-by-doing in production takes place and increasing income levels affect the demand structure, the innovative industry will become standardized in the advanced country and will be gradually transferred to the developing one. Each country will then experience a shift in the pattern of industrial specialization according to the evolving structure of comparative advantages and in particular the industrial development will be transmitted from the more advanced to the less developed country.

The “product cycle” theories provide therefore a consistent explanation to : 1) the intra-industry trade occurring between countries at different development stages ; 2) the flow of FDI from the more advanced countries, leading the process of industrial relocation.

In contrast to these “static similarities” in the explanation of the product cycle stages, the structure of comparative advantages and the pattern of trade, the “PC” and the “CPC” theories present some “dynamic dissimilarities” in the identification of the forces underlying the transmission of industrial development. In particular, a main difference lies on the role played by local firms vis-a-vis multinational enterprises: the “PC” theory presents the overseas investment strategy of US companies, while the “CPC” theory is based on the Japanese experience of industrial development.

Put in a simple way, according to the “PC” theory the advanced countries are the “actors”, and the flow of FDI is the “mechanism” for the industrial relocation. On the other