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

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  • 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.

Suggested Citation

  • Danny Leung, 2004. "The Effect of Adjustment Costs and Organizational Change on Productivity in Canada: Evidence from Aggregate Data," International Productivity Monitor, Centre for the Study of Living Standards, vol. 9, pages 52-61, Fall.
    • Handle: RePEc:sls:ipmsls:v:9:y:2004:5
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    Cited by:

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    2. 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.
    3. Yannis Hatzikian, 2015. "Exploring the Link between Innovation and Firm Performance," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 6(4), pages 749-768, December.
    4. Petr Hanel, 2007. "Productivity and innovation: an overview of the issues," Cahiers de recherche 07-22, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    5. Mr. Ayhan Kose & Mr. Roberto Cardarelli, 2004. "Economic Integration, Business Cycle, and Productivity in North America," IMF Working Papers 2004/138, International Monetary Fund.
    6. DeStefano, Timothy & Kneller, Richard & Timmis, Jonathan, 2018. "Broadband infrastructure, ICT use and firm performance: Evidence for UK firms," Journal of Economic Behavior & Organization, Elsevier, vol. 155(C), pages 110-139.
    7. Danny Leung & Yi Zheng, 2012. "What affects MFP in the long-run? Evidence from Canadian industries," Applied Economics, Taylor & Francis Journals, vol. 44(6), pages 727-738, February.
    8. Jason Allen & Walter Engert & Ying Liu, 2006. "Are Canadian Banks Efficient? A Canada--U.S. Comparison," Staff Working Papers 06-33, Bank of Canada.
    9. DeStefano,Timothy & Timmis,Jonathan David, 2021. "Robots and Export Quality," Policy Research Working Paper Series 9678, The World Bank.
    10. Anh Ngoc Mai & Huong Van Vu & Bien Xuan Bui & Tuyen Quang Tran, 2019. "The lasting effects of innovation on firm profitability: panel evidence from a transitional economy," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 3417-3436, January.
    11. Alicia García-Herrero & Josep Vilarrubia Author-Workplace-Name: Banco Central de la República Argentina, 2007. "The Laffer Curve of Macroeconomic Volatility and Growth: Can it be Explained by the Different Nature of Crises?," Money Affairs, CEMLA, vol. 0(1), pages 43-60, January-J.
    12. Prudence Serju, 2007. "Estimating Potential Output for Jamaica: a Structural VAR Approach," Money Affairs, CEMLA, vol. 0(1), pages 1-22, January-J.
    13. Yannis Hatzikian & Eleftherios Bampasis, 2017. "Exploring the Relationship of Innovation Intensity, Knowledge Production and Productivity in Greek SMEs Before the Eruption of Debt Crisis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(1), pages 294-318, March.
    14. 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.
    15. Richard Dion & Robert Fay, 2008. "Understanding Productivity: A Review of Recent Technical Research," Discussion Papers 08-3, Bank of Canada.
    16. DeStefano, Timothy & Timmis, Jonathan, 2024. "Robots and export quality," Journal of Development Economics, Elsevier, vol. 168(C).
    17. 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.
    18. Jason Allen & Walter Engert & Ying Liu, 2007. "A Comparison of Canadian and US Universal Banks: Efficiency, Productivity, and the Role of Technology," Money Affairs, CEMLA, vol. 0(1), pages 61-96, January-J.

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    More about this item

    Keywords

    Organizational Change; Productivity; Productivity Growth; Multifactor Productivity; Information Technology; Information and Communication Technologies; ICT; Investment; New Technology;
    All these keywords.

    JEL classification:

    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management

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