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A model of the growth of corporate productivity

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  • Solvay, J.
  • Sanglier, M.

Abstract

This paper develops a model of the growth of corporate productivity which captures the effects of both long-run technological advancement and short-term fluctuations in demand due to the economic cycle. Technological change is captured through the 'experience effect', where an individual's productive potential is raised by the cumulative productive capacity of all the employees of the enterprise, and the 'innovation effect' whereby total investment in R&D generates productivity improvements. The extent to which technological opportunities are translated into productive potential is dependent upon parameters which reflect the corporate culture of the enterprise. Simulation exercises, in which the key parameters of the model are calibrated using actual data for a range of companies, show that the model can explain well the evolution of productivity and employment. The paper demonstrates the use of the model as a management tool in characterizing and analysing the implications of different firm strategies.

Suggested Citation

  • Solvay, J. & Sanglier, M., 1998. "A model of the growth of corporate productivity," International Business Review, Elsevier, vol. 7(5), pages 463-481, October.
    • Handle: RePEc:eee:iburev:v:7:y:1998:i:5:p:463-481
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Saint-Paul, Gilles, 1997. "Business Cycles and Long-Run Growth," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 13(3), pages 145-153, Autumn.
    3. Gene M. Grossman & Elhanan Helpman, 1993. "Innovation and Growth in the Global Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262570971, December.
    4. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
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    Cited by:

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    2. Gregorio Sánchez-Marín & María Pemartín & Joaquín Monreal-Pérez, 2020. "The influence of family involvement and generational stage on learning-by-exporting among family firms," Review of Managerial Science, Springer, vol. 14(1), pages 311-334, February.

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