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Technology Upgrading with Learning Cost

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  • Ahn, Sanghoon
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    Abstract

    Adoption of new technology requires diversion of resources from direct production activities to learning/adjusting activities, which could reduce productivity temporarily. Focusing on the existence of such "learning cost", we derive a simple model on the optimal timing for technology upgrading. This model suggests that a firm perceived to have better learning ability will show more frequent technology upgrading and higher market value even with possibly lower current profitability. The model predictions are supported by regression results from a panel data set of more than 1,000 companies in the US during the late 1980s and the early 1990s. Simulations based on an extended model reproduce the negative correlation between investment growth and TFP growth.

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/13909/1/wp2003-21a.pdf
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    Bibliographic Info

    Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2003-21.

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    Length: 45 p.
    Date of creation: Sep 2003
    Date of revision:
    Handle: RePEc:hit:hitcei:2003-21

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    Related research

    Keywords: Technology; Learning; Total factor productivity (TFP); Market Value;

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    References

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    1. Andolfatto, D. & MacDonald, G.M., 1995. "Technological Innovation, Diffusion, and Business Cycle Dynamics," Working Papers 9503, University of Waterloo, Department of Economics.
    2. Jeffrey R. Campbell, 1997. "Entry, Exit, Embodied Technology, and Business Cycles," NBER Working Papers 5955, National Bureau of Economic Research, Inc.
    3. Susanto Basu & John G. Fernald & Matthew D. Shapiro, 2001. "Productivity Growth in the 1990s: Technology, Utilization, or Adjustment?," NBER Working Papers 8359, National Bureau of Economic Research, Inc.
    4. Brezis, Elise S & Krugman, Paul R & Tsiddon, Daniel, 1993. "Leapfrogging in International Competition: A Theory of Cycles in National Technological Leadership," American Economic Review, American Economic Association, vol. 83(5), pages 1211-19, December.
    5. Mehmet Yorukoglu, 1998. "The Information Technology Productivity Paradox," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 551-592, April.
    6. Boyan Jovanovic & Jeremy Greenwood, 1999. "The Information-Technology Revolution and the Stock Market," American Economic Review, American Economic Association, vol. 89(2), pages 116-122, May.
    7. Elhanan Helpman & Antonio Rangel, 1998. "Adjusting to a New Technology: Experience and Training," NBER Working Papers 6551, National Bureau of Economic Research, Inc.
    8. David Andolfatto & Glenn M. MacDonald, 1998. "Technology Diffusion and Aggregate Dynamics," Cahiers de recherche CREFE / CREFE Working Papers 58, CREFE, Université du Québec à Montréal.
    9. Thomas F. Cooley & Jeremy Greenwood & Mehmet Yorukoglu, 1994. "The replacement problem," Discussion Paper / Institute for Empirical Macroeconomics 95, Federal Reserve Bank of Minneapolis.
    10. Jeffrey R. Campbell, 1997. "Computational Appendix to Entry, Exit, Embodied Technology, and Business Cycles," Technical Appendices campbell98, Review of Economic Dynamics.
    11. repec:fth:simfra:95-08 is not listed on IDEAS
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    Cited by:
    1. Crespi, G., 2006. "Productivity And Firm Heterogeneity In Chile," PRUS Working Papers 36, Poverty Research Unit at Sussex, University of Sussex.
    2. Sanghoon Ahn, 2010. "Does Exporting Raise Productivity? Evidence from Korean Microdata," Working Papers id:3302, eSocialSciences.

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