Raymond Vernon argued that new products were developed by U.S.firms and first sold in the U.S.market because:

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According to Raymond Vernon's product life cycle theory, new products are developed by U.S. firms and first sold in the U.S. market because of the wealth and size of the U.S. market. This provides firms with an incentive to develop new products to cater to the demands of this market. European competitors being inactive and tax credits for R&D are not factors explicitly mentioned in Vernon's theory. The low cost of U.S. labor is also not an incentive for firms to develop costly process innovations, as process innovation is a separate concept from product innovation.

Raymond Vernon Argued That New Products Were Developed by U