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Technology Upgrading with Learning Cost

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  • Ahn, Sanghoon

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.

Suggested Citation

  • Ahn, Sanghoon, 2003. "Technology Upgrading with Learning Cost," CEI Working Paper Series 2003-21, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:hitcei:2003-21
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/13909/wp2003-21a.pdf
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    References listed on IDEAS

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    Cited by:

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    3. Clemente Ruiz Durán, 2014. "Mexico: auto industry and patenting in a technological dependent economy," Chapters, in: Sanghoon Ahn & Bronwyn H. Hall & Keun Lee (ed.), Intellectual Property for Economic Development, chapter 10, pages 240-263, Edward Elgar Publishing.

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    More about this item

    Keywords

    Technology; Learning; Total factor productivity (TFP); Market Value;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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