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New Trade Theory

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Exercise Two Development of the Cochlear implant:

Drawing upon New Trade Theory and Porter’s Theory of National Competitive Advantage as discussed in the lecture, outline the case for government assistance to emerging industries. Relate your answer to the Cochlear Case. 
 Without government funding, would it have been possible to develop this product in Australia?

Prior to government funding, Professor Clark was able to reach the prototype stage of the development of the Cochlear Implant. However, without government funding, there would have been inadequate finances and resources to commercialise the product and make it available to the public. The Australian governments role in the development of this product supports the theory of government role in supporting emerging products outlined in Porters Theory of National Competitive Advantage. The theory outlines that through strict product standards, focus on specialised factor creation and enforcing antitrust laws, governments can encourage organisations to a more competitive level.

Australia has advantageous “Factor Conditions” for the development of a technology such as the Cochlear implant, due to being a first world country with leading technology. The “Demand Conditions” for the Cochlear Implant stretched further than simply Australia - as evident by the 50,000 cases in Japan. Furthermore, the supporting industries - such as “Nucleus” aided in the internationalisation of the product as it progressed into Switzerland, the US and Japan.

As the product emerged internationally, particularly the 50,000 cases in Japan, it is likely that the partnership company experienced some cost advantages with the increased output of the product (economies of scale). As well as this, the specialisation of the product and the fact that Cochlear Enterprises had a first mover advantage, the company is now…...

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