technological-gap theorya theory that seeks to explain changes in the pattern of INTERNATIONAL TRADE over time and that is based on a dynamic sequence of technological and product INNOVATION and diffusion. Technologically, advanced countries with a high propensity to innovate (such as Japan) are able to achieve trade advantages by being able to offer sophisticated new products on world markets initially unobtainable from other sources. Over time, however, the technology is diffused and adopted by other countries, which are then able to supply the products concerned for themselves. Trade thus increases for the duration of the ‘imitation lag’. See PRODUCT LIFE-CYCLE THEORY, THEORY OF INTERNATIONAL TRADE.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005