Classical thinking, which stressed international differences in technology in conjunction with international differences in real wage levels as a source of comparative advantage, dominated trade theory until the appearance of the Heckscher–Ohlin (H–O) theory which centred on resource endowments as the main factor explaining international trade patterns.2 Nevertheless, technological innovation once again came to the forefront of research into trade with the development of the technology gap (Posner 1961) and the product cycle theories (Vernon 1966). On the one hand and according to Posner’s assumptions (1961), trade is generated by differences in the rate and nature of innovation. On the other hand, Vernon (1966) places less emphasis on the comparative cost doctrine3 and more on the timing of innovation. Along these lines, Jones and Bhagwati (1970) considered the way in which the H–O model could be applied to Vernon's product cycle theory. Vernon argued that developed countries tend to have a comparative advantage in producing those commodities, that are newly developed, and suggested a three-factor model: capital, "ordinary" labour, and human skills. Developed countries have a relative abundance of the third factor and, due to the role this factor is assumed to play in the production of new combinations or innovations in particular, developed countries will tend to have a comparative advantage in producing new commodities at early stages of production. Jones (1970) also highlighted the view that technological innovation is improved because there is "learning-by-doing". According to this concept, the higher the level of production (or the more "experience" in the techniques gained by using them), the greater the rate at which these techniques become more productive.