In other words, trade between two nations is still beneficial even if one country is less efficient in the production of two goods, so long as it is less inefficient in the production of one of the goods. Comparative advantage is also concerned with productivity. Countries are driven only by the maximization of production and consumption. There are only two countries engaged in the production and consumption of just two goods. There are no costs of transporting traded goods from one country to another.
Labor is the only resource in the production process.
Specialization in the production of one particular good does not result in gains in efficiency. The theory predicts that a country will specialize in products that require labor if the cost of labor is low relative to the cost of land and capital, and vice versa. His research found that U.S. exports require more labor-intensive production than its imports. The international product life cycle theory states that a company will begin by exporting its product and later undertake foreign direct investment as the product moves through its life cycle. In the new product stage, high purchasing power and demand of buyers in an industrialized country spurs a company to design and introduce a new product concept.