Is there a characterization of modules $N$ for which the functor $N\otimes-$ reflects exact sequences?
[Math] When tensor reflects exact sequences
ac.commutative-algebrahomological-algebra
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There is no reqson for $\times_2$ to be a chain map. Pick for example a spectral sequence such that the differential in $E_1$ is zero, such that the one on $d_2$ is not, and pick a any product $\times_1$ on $E_1$ such that it is not a chain map on $E_2=E_1$.
You can get such structures, though. For example, suppose that $X$, $Y$ qnd $Z$ are filtered complexes and that $m:X\otimes Y\to Z$ is a chain map compatible with the filtrations. Then if $E_X$, $E_Y$ and $E_Z$ are the spectral sequences gotten from $X$, $Y$ and $Z$, respectively, $m$ gives you maps $m_r:E^X_r\otimes E^Y_r\to E^Z_r$, all compatible with the differentials.
You'll find more details, for example, in McLeary's User guide.
I am going to concentrate on the underlying categorical issue here and leave the homological algebra to the experts in that subject.
A direct limit is also known as a colimit. Yours, I take it, is over a sequence $N$, and as such is called directed or filtered.
Being an short exact sequence $0\to A\to B\to C\to 0$ amounts three things:
$A\to B$ is a monomorphism or $0$ is its kernel, which are kinds of limit (or projective limit in old terminology), but finitary ones;
$B\to C$ is an epimorphism, or $C$ is its image, which are other kinds of colimit property, this time finitary ones.
the image of $A\to B$ is the kernel of $B\to C$, which combines properties of both kinds.
Now, limits commute with limits and colimits commute with colimits.
The question is whether filtered colimits commute with finite limits.
Indeed, they do if the category described is by a finitary algebraic theory.
I presume that a Grothendieck category is like this, though Zhen Lin says otherwise.
As David White says, the interest in filtered colimits arises from the fact that they are the ones that commute with finitary stuff such as limits in $\bf Set$.
However, this is not a theorem of categories in general.
As Zhen Lin points out, ${\bf Set}^{op}$ does not have this property. Limits and colimits in $\bf Set$ behave quite differently, as I emphasise in Chapter V of my book, Practical Foundations of Mathematics.
A preorder in which this happens is called meet-continuous. See Counterexamples O 4.5 of A Compendium of Continuous Lattices for complete lattices that are not meet-continuous.
(I had difficulty with my Internet connection when I originally posted this, so some of the intended text got deleted by mistake.)
I repeat that I am not an expert on homological algebra, but I note that the Wikipedia article on Grothendieck categories says explicitly that "direct limits (a.k.a. filtered colimits) of exact sequences are exact".
Best Answer
As Alex Becker pointed out, $N$ is faithfully flat iff $N\otimes_R -$ preserves and reflects exact sequences. Since $N$ is flat iff $N\otimes_R -$ preserves exact sequences, you might think $N$ is faithful iff $N\otimes_R -$ reflects exact sequences. This is wrong, as we'll show below. These faithfully flat modules are extremely important, and probably the better place to do work if you can manage it. I think the concept of a module $N$ such that $N\otimes_R -$ reflects exact sequences (but $N$ is not faithfully flat) is an interesting one. However, this concept doesn't seem to appear in T.Y. Lam's Lectures on Modules and Rings, and that's my bible for these types of questions. So it seems the community hasn't found this concept interesting yet. Since no one seems to have coined a phrase for these yet, let's call them reflecting modules (not to be confused with reflexive modules).
When seeking to prove a module is flat you can use that $N\otimes_R -$ is always right exact, so all you need to show is that $N\otimes_R -$ preserves monomorphisms. To show $N$ is reflecting is harder. For example, you must show that if $N\otimes_R g$ is an epimorphism, then $g$ is an epimorphism. You must also show that if $N\otimes_R f$ is a monomorphism then $f$ is a monomorphism. These two follow if $N\otimes_R -$ is a faithful functor (this explains the terminology). According to Theorem 7.1 in Theory of Categories by Barry Mitchell, if $T:C\rightarrow D$ is faithful functor between exact categories which have zero objects, and if $T$ preserves the zero objects, then $T$ reflects exact sequences. Since $R$-mod is an exact category with a zero object, this tells us that $N$ is reflecting if $N\otimes_R -$ is faithful. We'll show the converse below. Consider the following two properties:
(1) For any left $R$-module $M$, $N\otimes_RM=0 \Rightarrow M=0$
(2) A homomorphism of left $R$-modules $\phi:M'\rightarrow M''$ is zero if the induced homomorphism $N\otimes_R M' \rightarrow N\otimes_R M''$ is zero. Note that this property is exactly saying $N\otimes_R -$ is faithful.
When $N$ is flat, these are equivalent, and also equivalent to the fact that $N$ is faithfully flat. Even without the flatness hypothesis, the theorem above shows (2) implies $N$ is reflecting. We can also see that (2) implies (1) because if $N\otimes_R M = 0$ then the map $N\otimes_R 0 \rightarrow N\otimes_R M$ is zero, so the map $0\rightarrow M$ is zero, proving $M=0$. Next, (1) implies (2) because if $N\otimes_R \phi = 0$ then $0=im(N\otimes_R \phi)=N\otimes_R im(\phi)$ so by (1), $im(\phi)=0$. Finally, $N$ reflecting implies (1) because knowing $N\otimes_R 0 \rightarrow N\otimes_R M\rightarrow N\otimes 0$ is exact implies $0\rightarrow M\rightarrow 0$ is exact, so we see $N\otimes_R M=0\Rightarrow M=0$. This completes the characterization:
(EDIT: Thanks to Martin for pointing out a flaw in the previous version. Here is an argument, now superfluous and a bit fishy, that $N$ reflecting implies (2): suppose $N\otimes_R \phi$ is zero. Then, because $N\otimes_R ker(\phi) = ker(N\otimes_R \phi)$, we see $0\rightarrow N\otimes_R M' \rightarrow N\otimes_R ker(\phi)\rightarrow 0$ is exact, so $0\rightarrow M'\rightarrow ker(\phi)\rightarrow 0$ is exact, i.e. $\phi=0$. This is fishy because it's not clear to me that $N\otimes ker(-) = ker(N\otimes -)$, though it does seem to work for $im(-)$.)
It may also be equivalent to say that for all maximal ideals $I\subset R$, if $N\otimes_R R/I=0$ then $R/I=0$, but I haven't checked this.
EDIT (in response to requests from Will Sawin and Zhen Lin for examples): I'll end by remarking on a confusing bit of terminology and giving some examples. There is a notion of what it means for a module $N$ to be faithful, but it is not equivalent to the above. One says $N$ is faithful if $Ann_R(N)=0$ (this appears in Lam). Note that this website erroneously calls a module faithful if it satisfies (1) above, but the link is still useful as it gives some properties of such modules and examples of modules which satisfy (1) but are not flat. An additional example is $N=\mathbb{Z}\oplus \mathbb{Z}/2$ over $R=\mathbb{Z}$. This seems to show that if $M$ is faithfully flat and $L$ is any module, then $N = M\oplus L$ will be reflecting but not necessarily flat. It's easy to see that $N$ is faithful iff for all nonzero $a\in R$, $aN \neq 0$. So (1) implies $N$ is faithful, because we can take $M=(a)$ for each $a$ and use the fact that $N\otimes_R (a) = aN$.
Note that $N$ faithful does not imply that $N\otimes -$ is a faithful functor. For example, $\mathbb{Q}$ is faithful as a $\mathbb{Z}$-module (since it's torsion free), but $\mathbb{Q}$ clearly fails (1) because $\mathbb{Q}\otimes \mathbb{Z}/2=0$. Faithfully flat implies faithful and flat, but not conversely (again because of $\mathbb{Q}$). Indeed, a module can even be projective and faithful, but fail to be faithfully flat. Consider $P=\mathbb{Z}\oplus \mathbb{Z}\oplus \dots$ as a module over $R = \mathbb{Z}\times \mathbb{Z}\times \dots$. It's faithful because it's a subring, it's projective (e.g. by the dual basis lemma), but it's not faithfully flat because for any maximal ideal $m$ of $R$ containing $P$, $Pm=P$.