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The Effect of Adjustment Costs and Organizational Change on Productivity in Canada: Evidence from Aggregate Data

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Author Info
Danny Leung ()
Abstract

Danny Leung of the Bank of Canada provides support for the hypothesis that organizational change is a necessary condition for the full realization of the productivity gains associated with ICT. Using aggegate data, the author finds econometric evidence that the impact of computer investment is not fully realized until three years after the initial investment. Firms appear to need a learning period during which they make the necessary adjustments to their organizational structures in order to benefit from the productivity-augmenting potential of ICT. One implication of this analysis is that despite the current lull in investment, productivity growth in Canada should continue to remain fairly robust as firms continue to integrate new technologies into their production processes.

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Publisher Info
Article provided by Centre for the Study of Living Standards in its journal International Productivity Monitor.

Volume (Year): 9 (2004)
Issue (Month): (Fall)
Pages: 52-61
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Handle: RePEc:sls:ipmsls:v:9:y:2004:5

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Related research
Keywords: Organizational Change; Productivity; Productivity Growth; Multifactor Productivity; Information Technology; Information and Communication Technologies; ICT; Investment; New Technology;

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Find related papers by JEL classification:
O51 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D
M11 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Production Management

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Susanto Basu & John G. Fernald & Nicholas Oulton & Sylaja Srinivasan, 2003. "The case of the missing productivity growth: or, does information technology explain why productivity accelerated in the United States but not the United Kingdom?," Working Paper Series WP-03-08, Federal Reserve Bank of Chicago. [Downloadable!]
    Other versions:
  2. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, And The Demand For Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 339-376, February. [Downloadable!] (restricted)
    Other versions:
  3. Michael T. Kiley, 1999. "Computers and growth with costs of adjustment: will the future look like the past?," Finance and Economics Discussion Series 1999-36, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  4. Hashmat Khan & Marjorie Santos, 2002. "Contribution of ICT Use to Output and Labour-Productivity Growth in Canada," Working Papers 02-7, Bank of Canada. [Downloadable!]
  5. Brynjolfsson, Erik & Hitt, Lorin M., 2004. "Computing Productivity: Firm-Level Evidence," Working papers 4210-01, Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
    Other versions:
  6. Lichtenberg, Frank R, 1988. "Estimation of the Internal Adjustment Costs Model Using Longitudinal Establishment Data," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 421-30, August. [Downloadable!] (restricted)
  7. Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall. [Downloadable!] (restricted)
  8. James Bessen, 2002. "Technology Adoption Costs and Productivity Growth: The Transition to Information Technology," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 443-469, April. [Downloadable!] (restricted)
  9. Stephen D. Oliner & Daniel E. Sichel, 2002. "Information technology and productivity: where are we now and where are we going?," Economic Review, Federal Reserve Bank of Atlanta, issue Q3, pages 15-44. [Downloadable!]
    Other versions:
  10. Stiroh, Kevin J, 2002. "Are ICT Spillovers Driving the New Economy?," Review of Income and Wealth, Blackwell Publishing, vol. 48(1), pages 33-57, March. [Downloadable!] (restricted)
  11. Alain Paquet & Benoit Robidoux, 1997. "Issues on the Measurement of the Solow Residual and the Testing of its Exogeneity: a Tale of Two Countries," Cahiers de recherche CREFE / CREFE Working Papers 51, CREFE, Université du Québec à Montréal. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Dirk Pilat, 2005. "Canada's Productivity Performance in International Perspective," International Productivity Monitor, Centre for the Study of Living Standards, vol. 10, pages 24-44, Spring. [Downloadable!]
  2. Richard Dion & Robert Fay, 2008. "Understanding Productivity: A Review of Recent Technical Research," Discussion Papers 08-3, Bank of Canada. [Downloadable!]
  3. Jean-Francois Arsenault & Andrew Sharpe, 2008. "An Analysis of the Causes of Weak Labour Productivity Growth in Canada since 2000," International Productivity Monitor, Centre for the Study of Living Standards, vol. 16, pages 14-39, Spring. [Downloadable!]
  4. Danny Leung & Yi Zheng, 2008. "What Affects MFP in the Long-Run? Evidence from Canadian Industries," Working Papers 08-4, Bank of Canada. [Downloadable!]
  5. Someshwar Rao & Andrew Sharpe & Jeremy Smith, 2005. "An Analysis of the Labour Productivity Growth Slowdown in Canada since 2000," International Productivity Monitor, Centre for the Study of Living Standards, vol. 10, pages 3-23, Spring. [Downloadable!]
  6. M. Ayhan Kose & Roberto Cardarelli, 2004. "Economic Integration, Business Cycle, and Productivity in North America," IMF Working Papers 04/138, International Monetary Fund. [Downloadable!]
  7. Jason Allen & Walter Engert & Ying Liu, 2006. "Are Canadian Banks Efficient? A Canada--U.S. Comparison," Working Papers 06-33, Bank of Canada. [Downloadable!]
  8. Petr Hanel, 2007. "Productivity and innovation: an overview of the issues," Cahiers de recherche 07-22, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke. [Downloadable!]
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