Ch 8 - Technological Change & Industrial Innovation

Ch 8 - Technological Change & Industrial Innovation -...

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Technological Change: - Labor Productivity: = the oldest & most commonly used productivity measure - ratio of output to input – labor prod = output ÷ labor hour = unreliable measure of technological efficiency - for same prod function, there can be an increase in labor prod when labor gets substituted by capital while keeping output same. = resultant increase in labour prod is not because of technological change Productivity Increase without Techno Change: Total Factor Productivity: - relates change in output to changes in both labour & capital inputs - Consider the production function: Q = a(bL + cK) - Total factor productivity is given by: α = Q / (bL + cK) Q = quantity of output L = quantity of labour K = quantity of capital b & c = constants - If more than 2 inputs are used, Total factor Productivity becomes: α = Q / a1I1 + a2I2 + … + anIn I 1 = amt of first input used I n = amt of n th input used a 1 = price of first input used a n = price of n th input used EXAMPLE: Caterpillar Heavy Machinery - Cost Management & Innovation - The challenge facing most companies is how to be innovative yet keep costs under control = a trade-off hard to manage. - “Sourcing capabilities” from alliance partners according to Accenture Consulting can be key to enhancing operating efficiency and improving innovation performance in knowledge-based industries.
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- Such strategy can help players like Glaxo to divest non-core businesses to smaller players = confident that their global partners can deliver business outcomes at scale. -
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Ch 8 - Technological Change & Industrial Innovation -...

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