Improving industrial performance through integrating quality and productivity advances

After reviewing reasons/or the belated emphasis in U.S. industry on substantial advances in quality standards, attention turns to developing a diagnostic basis for organizing a continuing improvement program. This is followed by a detailed review of the elements of a program to identify and to overcome some common sources of shortcomings in productivity as well as in product quality.     

Incorporating ancillary measures of process and quality change into a superlative productivity index

One of the persistent problems plaguing the measurement of productivity and output is accounting for changes in product quality. A similar problem arises in attempting to explain shifts in a production function using information on changes in the characteristics of the production process itself. We consider these problems under a behavioral model in which the firm chooses a profit-maximizing bundle of input/output/process characteristics as well as the profit maximizing levels of input and output. This view of quality change is similar to the endogenous design index advocated by Triplett [1983] for industrial prices and the endogenous quality indexes analyzed by Pollak [1983] for consumer prices. We show how a price-characteristics locus can be used to adjust the Tornqvist output- and input-oriented multifactor productivity indexes of Caves, Christensen and Diewert [1982] for changes in input, output and process characteristics. To show the applicability of the methodology to services, we apply the results in the framework of the commercial banking measurement of Fixler [1988] to measure the impact of bank branching on multifactor productivity.The refereeing process of this paper was handled through R. Färe.     

Distance functions,bank output,and productivity

Journal of Productivity Analysis - The current approach to determining banking productivity using multioutput distance functions or Malmquist indices is not appropriate. This problem is specific to...     

Academic content,research productivity,and tenure

This study examines the influence of a Finance doctoral program’s academic content on the research productivity of the graduates at the time of the tenure decision. The results of this investigation show that a Finance program’s academic content has no influence on the total number of publications of program graduates, but finds a significant relationship between academic content and graduate’s records of publications in top finance journals by the time of the tenure evaluation. More precisely, doctoral programs requiring more mathematically oriented classes such as Continuous Time Finance and/or Stochastic Calculus produce graduates who have a better record of publication in top finance journals at the time of tenure than those graduating from programs without these requirements.     

Efficiency, productivity, and scale economies in the U.S. property-liability insurance industry

The paper examines efficiency, productivity and scale economies in the U.S. property-liability insurance industry. Productivity change is analyzed using Malmquist indices, and efficiency is estimated using data envelopment analysis. The results indicate that the majority of firms below median size in the industry are operating with increasing returns to scale, and the majority of firms above median size are operating with decreasing returns to scale. However, a significant number of firms in each size decile have achieved constant returns to scale. Over the sample period, the industry experienced significant gains in total factor productivity, and there is an upward trend in scale and allocative efficiency. More diversified firms and insurance groups were more likely to achieve efficiency and productivity gains. Higher technology investment is positively related to efficiency and productivity improvements.     

University spin-offs vs. other NTBFs: Total factor productivity differences at outset and evolution

Previous empirical research suggests that university spin-offs under-perform in economic terms compared to other new technology-based firms (NTBFs) in their early years. The usual explanations suggest a lower capabilities endowment of university spin-offs compared to other NTBFs. Using a longitudinal Spanish dataset we compare the evolution of firms′ total factor productivity (capabilities endowment) in both kinds of firm. Productivity grew faster in university spin-offs and their initial underperformance disappeared after 2 or 3 years of operation. The evidence therefore suggests that university spin-offs have lower initial substantive capabilities but greater dynamic capabilities than independent NTBFs. Possible explanations are discussed.     

Externalities, efficiency, regulation, and productivity growth in the U.S. electric utility industry

This paper examines the decomposition of total factor productivity growth for firms subject to regulation, given the production of a bad output. The production of good and bad outputs provides benefits and costs to society. Corporate socially responsible firms recognize the cost to society of producing the bad output. The paper separates the production technology and regulation effects from both the scale and technical change components. The paper also examines the measurement and decomposition of productivity growth when not accounting for production of the bad output. Using a 1992–2000 panel of 34 U.S. investor-owned electric utilities, results indicate that improvements in the scale, efficiency change, and technical change components contributed to positive growth. Not accounting for production of the bad output led to, on average, an overestimation of both the rate of productivity growth, and the contributions of scale economies and technical change to changes in productivity growth.

Growth,productivity and diversification in Africa

The purpose of this article is to investigate the relationship among economic growth, productivity and diversification. Our results have shown that deepening diversification leads to improvements in total factor productivity among other determinants in African economies. The significance of the link between diversification and economic growth in the case of African economies cannot be gainsaid. It means that African countries can scale up their economies’ growth by raising their total factor productivity through pursuing policies that enhance diversification.     

Quadratic-mean-of-order-r indexes of output,input and productivity

Journal of Productivity Analysis - This paper deals with the quadratic-mean-of-order-r indexes of output, input and productivity. Each index is a family of indexes that unify many of the existing...     

U.S. productivity in agriculture and R&D

This paper examines the impact of R&D on multifactor productivity in the U.S. agricultural sector over the 1910–1990 period. We use the Bennet–Bowley indicator to measure agricultural productivity based on a multiple output-multiple input technology. We demonstrate the relationship between the price dependent Bennet–Bowley indicator and the Luenberger productivity indicator which is constructed from directional distance functions without requiring price information. These performance measures are dual to the profit function which arguably makes them especially useful in the agricultural setting. We employ time-series techniques to investigate the effect of R&D on the pattern of productivity growth. We find that we cannot reject the presence of a cointegrating relationship between the two series and that productivity growth in the U.S. agriculture responds positively to R&D expenditure with a lag of between four and ten periods.

Efficiency and productivity growth comparisons of European and U.S. Air carriers: A first look at the data

In this paper we carry out technical efficiency and productivity growth comparisons among the four largest European carriers and eight of their American counterparts. The time period of our comparisons is 1976 through 1986. This is a particularly interesting period since it begins just after the informal steps toward deregulation in the United States and ends just prior to the introduction of the first wave of reforms by the Council of Ministers in Europe. We also identify the potential efficiency gains of the European liberalization by comparing efficiency differences between the two carrier groups. The reductions in inefficiency describe the amount that inputs can be decreased without altering output.     

Real rigidities, productivity improvements and investment dynamics

The theoretical literature on business cycles predicts a positive investment response to productivity improvements, a prediction we question from theoretical and empirical perspectives. We show that a short-term negative response of investment to a positive technology shock is consistent with a reasonably parameterized new Keynesian dynamic stochastic general equilibrium (DSGE) model in which firm-specific capital introduces an additional real rigidity, and monetary policy is not fully accommodative. Employing Bayesian techniques, we provide evidence that permanent productivity improvements have short-term, contractionary effects on investment. Although this result can be obtained from both firm-specific and rental capital models, only in the case of the former is the average price duration in line with the microeconometric evidence.     

Riskiness,endogenous productivity dispersion and business cycles

In the data, cross-sectional productivity dispersion is countercyclical at both the plant level and the firm level, see e.g. Bloom (2009). I incorporate a firm׳s choice of risk level into a model of firm dynamics with real business cycle features to explain this empirical finding both qualitatively and quantitatively. In the model, in every period, each firm chooses the investment amount and the risk level associated with a production project every period. All projects available to each firm have the same expected flow return, determined by the aggregate and idiosyncratic shocks to the firm׳s productivity, and differ from one another only in their risk. The endogenous option of exiting the market and the limited funding for new investment jointly play an important role in motivating firms׳ risk-taking behavior. The model predicts that, in each period, relatively small firms are more likely to take risk and hence exhibit a higher exit rate, and that the cross-sectional productivity dispersion, measured as the standard deviation of the realized individual component of productivity, is larger in recessions.     

Wage bargaining,productivity growth and long-run industry structure

This paper studies the innovation dynamics of an oligopolistic industry. The firms compete not only in the output market but also by engaging in productivity enhancing innovations to reduce labor costs. Rent sharing may generate productivity dependent wage differentials. Productivity growth creates intertemporal spillover effects, which affect the incentives for innovation at subsequent dates. Over time the industry equilibrium approaches a steady state. The paper characterizes the evolution of the industry's innovation behavior and its market structure on the adjustment path.     

Firm heterogeneity, productivity and spatially bounded knowledge externalities

In this paper, we argue that conceptually disentangling the ‘context versus composition’ aspects of regional growth is a multilevel issue. By applying multilevel models (also called random-effects models), we show (1) the importance of considering firm-specific characteristics simultaneously with region-specific characteristics, as we find that a large part of what is traditionally assigned to the impact of the region should be assigned to firm-specific characteristics and (2) that existing single-level methodologies can be problematic, as they are vulnerable to the charge of estimating significance levels that are too liberally assigned and promote exaggerations. This is illustrated empirically by showing that single-level approaches would lead to the conclusion that innovation spillovers are highly significant in a setting of Dutch urban growth differentials, while multilevel analyses shows less liberally assigned significance levels. We conclude that multilevel-effect models better fit research questions that combine firm and spatial characteristics simultaneously, especially because they allow firm-specific characteristics to be differently linked to their regional contexts.     

Pay,productivity and aging in Major League Baseball

Using panels of player pay and performance from Major League Baseball (MLB), we examine trends in player productivity and salaries as players age. Pooling players of all ability levels leads to a systematic bias in regression coefficients. After addressing this problem by dividing players into talent quintiles, we find that the best players peak about 2 years later than marginal players, and development and depreciation of performance appear to be more pronounced for players with the highest ability levels. Within-career variation, however, is less pronounced than between-player variation, and the performance level of players within a given quintile will typically remain lower than the talent level for rookies in the next higher quintile. We also find preliminary evidence that free agents are paid proportionately to their production at all ability levels, whereas young players’ salaries are suppressed by similar amounts.     

Spillovers,absorptive capacity and agglomeration

I study knowledge spillovers in an industry where firms are heterogeneous in their ability to adopt knowledge (absorptive capacity). I set up a model in which firms choose locations anticipating potential gains and losses from other firms’ R&D activity. I apply the model to the US software industry and obtain the following results: the data supports localized knowledge spillovers; firms that have higher absorptive capacity are sorted into more agglomerated counties; ignoring firm heterogeneity leads to biased estimates of gains from spillovers; spillovers play an important role in explaining the geographic distribution of firms, but only within regions with high R&D activity.