Assessing the impact of JIT using economic theory

This paper combines ideas that are well founded in the production and inventory management literature, with analytical approaches that have been long established in the economic theory literature, to reveal and explore production-function characteristic differences between JIT producers and non-JIT producers among electronic firms in Ontario, Canada. The methodology employed is the estimation of the CES-TL total cost system. Our primary conclusion is that JIT firms are more cost-efficient and appear to be distinct from the non-JIT group. This conclusion is supported by: (1) the fact that, in most cases, the elasticities calculated from the two groups of firms are significantly different; (2) the fact that the cost elasticity with respect to output is lower for the JIT firms than for the non-JIT firms, indicating that the former are better able to capture economies of scale and density; (3) the difference between the elasticities of factor productivity, with respect to output changes, shows the JIT firms as being more labor- and materials-saving than the non-JIT firms.