Economists and politicians in Sweden stated in the early 1990s that devaluations of the country's currency had lessened the external pressure on manufacturing and led to a delay in structural change and rationalizations. The theory of transformation pressure generalizes the idea that productivity growth in firms is promoted by intense competition, cost pushes and low product demand. The main challenge faced by such a theory is to explain why it seems that an immediate threat is needed to get a productive response from firms. Three separate explanations are presented here emphasizing either the value of waiting to get more information about potential threats, the irrational tendency to ignore threats until they show up or the stimulation of individual creativity when firms are put under real pressure. But productivity growth is not always promoted by tight external circumstances. Growth may be maximized if pressure in each period is moderate or if periods with strong pressure are followed by periods of financial and technical consolidation, scale advantages and lesser needs to spend resources on rationalization in order to survive.
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Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number
2001:3.
Length: 36 pages Date of creation: 27 Feb 2001 Date of revision: Handle: RePEc:hhs:sunrpe:2001_0003
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Find related papers by JEL classification: D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm N64 - Economic History - - Manufacturing and Construction - - - Europe: 1913- O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
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.:
Ted O'Donoghue & Matthew Rabin, 1999.
"Doing It Now or Later,"
American Economic Review,
American Economic Association, vol. 89(1), pages 103-124, March.
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