Product Life Cycle and Innovativeness: The Case of MENA

Abstract

One discussion in the literature of economics is the interaction between product life cycle and technological advancement. Firms may enjoy high profits and pay higher wages to the workers due to higher prices by introduction of new products in early stages and product developments in later stages. The aim of this study, by assuming that life cycle stage of a product represents its level of technology intensity, is to measure the innovative capabilities of selected benchmark and MENA countries by developing a maturity index and then to see how MENA countries adapt themselves to relative maturity changes of products at the global level. Empirical findings using COMTRADE bilateral trade data for the period 1996-2013 showed that most of MENA countries’ –especially in Algeria and Turkey- adaptation performance fall in high- and low-tech industries. Moreover, adaptation pattern of MENA countries except for Egypt shows a decreasing trend in the highest growing products World trade. The performance of benchmark countries such as USA, South Korea, and Germany in terms of maturity adaptation was found to be increasing. We found that adaptation performance of MENA countries showed improvements in medium high- and medium low-tech industries mostly due to chemical and plastic industries in the last quarter. All these findings imply to call for policies that give incentive to create young products in high-tech and most demanded industries and to rejuvenate those already exist.