Note on Theories of Strategic Trade Beyond Comparative Advantage

by: Robert E. Kennedy

Publication Date: December 17, 2009
Length: 8 pages
Product ID#: 1-428-935

Core Disciplines: Economics, International Business, Strategy & Management

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Teaching Note

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The so-called New International Economics (alternatively, Strategic Trade Theory) explores situations where markets economic conditions depart from standard conditions – because of market power, economies of scale, externalities, etc. Economists have shown that it is theoretically possible for government intervention to improve national incomes. This note unpacks several Strategic Trade models, and seeks to explain the logic behind each. It concludes with several critiques of the models. The note complements and expands on the material in Trade and Comparative Advantage (WDI note # 1-428-934).

Teaching Objectives

After reading and discussing the material, students should:

  • describe appropriate business terms and principles approriate to this case,
  • apply critical concepts from earlier learning to define a solution to the case,
  • successfully articulate data and information in support of the solution proposed,
  • critically analyze and discuss other responses and solutions to the case,
  • draw lessons from the case analysis,
  • generalize the learnings of this case to other business challenges and decisions in organizations other than the one analyzed in this case study,
  • demonstrate leadership and scholarship in analysis.