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This study examines how characteristics of an interfirm labor-flow network affect firm productivity. Using employee job histories to trace labor movement between organizations, we construct labor-flow networks for both information technology (IT) and non-IT labor and analyze how a firm's network structure for the two types of labor affects its performance. We find that hiring IT workers from a structurally diverse network of firms can substantially improve firm productivity, but that the same is not true for non-IT labor, where we find little benefit of network diversity. We hypothesize that these results reflect differences in the types of knowledge diffusion facilitated by different types of labor flows, with IT labor enabling the transfer of new and innovative firm practices, which benefits from diversity, while non-IT labor flows are more closely associated with implementation of complementary organizational practices, which may benefit from a critical mass of workers with a common knowledge base. Together, these results demonstrate the importance of incorporating a network perspective in understanding the full impact of spillover effects from organizational hiring activities. [ABSTRACT FROM AUTHOR]

We use a unique, hand-collected data set to examine learning and forgetting in hip replacement surgery as a function of a surgeon's experience with specific surgical device versions and the time between their repeat uses. We also develop a generalizable method to correct for the left censoring of device-version-specific experience variables that is a common problem in highly granular experience data, using maximum simulated likelihood estimation with simulation over unobservables conditional on observables. Even for experienced surgeons, the first use of certain device versions can result in at least a 32.4% increase in surgery duration, hurting quality and productivity. Furthermore, with the passage of time, surgeons can forget knowledge gained about the use of particular devices. For certain devices, when the time gap between repeat uses increases from its median to its 75th percentile, surgery duration increases by about 3.4%. The high productivity and quality costs associated with device variety suggest that the gain from a new device design needs to be large enough to compensate for the short-term disadvantages of starting up on a new learning curve and of increasing the chances of knowledge depreciation over time. [ABSTRACT FROM AUTHOR]

Management has a large effect on the productivity of medium and large firms. But does management matter in micro and small firms, where the majority of the labor force in developing countries works? We develop 26 questions that measure business practices in marketing, stock-keeping, record-keeping, and financial planning. These questions have been administered in surveys in Bangladesh, Chile, Ghana, Kenya, Mexico, Nigeria, and Sri Lanka. We show that variation in business practices explains as much of the variation in outcomes-sales, profits, and labor productivity and total factor productivity-in microenterprises as in larger enterprises. Panel data from three countries indicate that better business practices predict higher survival rates and faster sales growth. The association of business practices with firm outcomes is robust to including numerous measures of the owner's human capital. We find that owners with higher human capital, children of entrepreneurs, and firms with employees employ better business practices. Data, as supplemental material, are available at . This paper was accepted by Toby Stuart, entrepreneurship and innovation. [ABSTRACT FROM AUTHOR]

Extending research on organizational learning to multiproduct environments is of particular importance given that the vast majority of products are manufactured in such environments. We investigate learning in a multiproduct facility drawing on exceptionally rich data for a manufacturing firm that is a leading producer of high-technology hardware components. Weekly data for 10 years from the firm's production and human resource tracking systems are augmented by surveys of managers and engineers and by extensive firsthand observation. We find that productivity improves when multiple generations of the firm's primary product family are produced concurrently, reflecting the firm's ability to augment and transfer knowledge from older to newer product generations. No significant transfer of knowledge is evident between the primary product family and other products. Productivity is, however, adversely affected when the production facility is faced with extensive within-product buyer-specific customizations. We develop the implications of these findings for theory and practice. This paper was accepted by Serguei Netessine, operations management. [ABSTRACT FROM AUTHOR]

This paper examines how firm investments in technology-based employee monitoring impact both misconduct and productivity. We use unique and detailed theft and sales data from 392 restaurant locations from five firms that adopt a theft monitoring information technology (IT) product. We use difference-in-differences models with staggered adoption dates to estimate the treatment effect of IT monitoring on theft and productivity. We find significant treatment effects in reduced theft and improved productivity that appear to be primarily driven by changed worker behavior rather than worker turnover. We examine four mechanisms that may drive this productivity result: economic and cognitive multitasking, fairness-based motivation, and perceived increases of general oversight. The observed productivity results represent substantial financial benefits to both firms and the legitimate tip-based earnings of workers. Our results suggest that employee misconduct is not solely a function of individual differences in ethics or morality, but can also be influenced by managerial policies that can benefit both firms and employees. [ABSTRACT FROM AUTHOR]

This paper introduces satellite-tracked real-time data from a large fishing firm managing its vertically, horizontally, and geographically linked ships to study the causal impact of integration on total factor productivity (TFP) after the firm acquired its vertically unintegrated contractual fish suppliers. TFP increased 16% among newly integrated ships, whereas it did not vary for already owned ships. Some classic mechanisms such as increased effort due to monitoring do not systematically explain TFP gains under integration, whereas evidence on hold-up threat alleviation is mixed. Importantly, enhanced knowledge transfer and hierarchical authority enacting productivity-improving operational practices among newly integrated ships are more likely explanations of the results. [ABSTRACT FROM AUTHOR]

Product launch-an event when a new product debuts for production in a plant-is an important phase in product development. But launches disrupt manufacturing operations, resulting in productivity losses. Using data from North American automotive plants from years 1999-2007, we estimate that a product launch entails an average productivity loss of 12%-15% at the plant level. This translates to a monetary loss of $42-$53 million per launch in lost productivity. We identify several ways to mitigate the decrease in productivity. Product (or mix) flexibility in the body shop is critical for reducing the productivity loss. A plant's past experiences with product launches as well as with manufacturing similar products (specifically, on the same platform as the launch product) temper the productivity losses even further. Nevertheless, there are subtle differences in the accrued learning with these two types of experiences: whereas the positive impact of platform experience persists over time, the learning accrued with launching other products in the same plant decays more quickly. Altogether, our results suggest that launching products at a flexible plant with appropriate platform experience could recover approximately $31 million per launch in lost productivity. [ABSTRACT FROM AUTHOR]

We gather detailed data on organizational practices and information technology (IT) use at 253 firms to examine the hypothesis that external focus-the ability of a firm to detect and therefore respond to changes in its external operating environment-increases returns to IT, especially when combined with decentralized decision making. First, using survey-based measures, we find that external focus is correlated with both organizational decentralization, and IT investment. Second, we find that a cluster of practices including external focus, decentralization, and IT is associated with improved product innovation capabilities. Third, we develop and test a three-way complementarities model that indicates that the combination of external focus, decentralization, and IT is associated with significantly higher productivity in our sample. We also introduce a new set of instrumental variables representing barriers to IT-related organizational change and find that our results are robust when we account for the potential endogeneity of organizational investments. Our results may help explain why firms that operate in information-rich environments such as high-technology clusters or areas with high worker mobility have experienced especially high returns to IT investment and suggest a set of practices that some managers may be able to use to increase their returns from IT investments. [ABSTRACT FROM AUTHOR]

In this study we consider the linkage between productivity change and profit change. We develop an analytical framework in which profit change between one period and the next is decomposed into three sources: (i) a productivity change effect (which includes a technical change effect and an operating efficiency effect), (ii) an activity effect (which includes a product mix effect, a resource mix effect, and a scale effect), and (iii) a price effect. We then show how to quantify the contribution of each effect, using only observed prices and quantifies of products and resources in the two periods. We illustrate our analytical decomposition of profit change with an empirical application to Spanish banking during the period 1987-1994. [ABSTRACT FROM AUTHOR]

The literature on JIT production suggests a causal link between work-in-process inventory and manufacturing productivity. Such a connection has been described in numerous case studies but never tested statistically. This paper uses historical data for 52 Japanese automotive companies to evaluate the inventory-productivity relationship. We find that firms increased their productivity rank during periods of substantial inventory reduction. More detailed tests suggest that inventory reductions stimulated gains in productivity: On average, each 10% reduction in inventory led to about a 1% gain in labor productivity, with a lag of about one year. Such effects were more immediate for Toyota affiliates, but undetectable for close suppliers of Nissan. These findings imply that inventory reduction served as an important driver of process improvement for many Japanese automotive companies, although some firms emphasized other methods. [ABSTRACT FROM AUTHOR]

Recent popular business literature has suggested that there is a significant trend in the United States for firms to decrease the size and increase the focus of manufacturing plants they operate, and that this leads to higher productivity. This paper tests empirically the validity of these claims. We analyze data on virtually the entire population of manufacturing plants in the United States and find that, contrary to the popular business literature, the average size of plants increased during the period 1972-1984. However, consistent with the popular notion, the rate of growth in plant size slowed considerably, and even turned negative for a category of large plants. Plant focus did increase during this period. We then investigate the relationship between productivity and plant characteristics including plant size and plant focus. Overall, our results do not support argument that reduction in plant size results in productivity gains. However, we do find support for this argument in some two-digit SIC industries; also, scale economies in the entire population decreased over the period 1972-1982. We also find only limited support for the popular argument that plant focus increases productivity. [ABSTRACT FROM AUTHOR]

The "productivity paradox" of information systems (IS) is that, despite enormous improvements in the underlying technology, the benefits of IS spending have not been found in aggregate output statistics. One explanation is that IS spending may lead to increases in product quality or variety which tend to be overlooked in the aggregate statistics, even if they increase output at the firm-level. Furthermore, the restructuring and cost-cutting that are often necessary to realize the potential benefits of IS have only recently been undertaken in many firms. Our study uses new firm-level data on several components of IS spending for 1987-1991. The dataset includes 367 large firms which generated approximately 1.8 trillion dollars in output in 1991. We supplemented the IS data with data on other inputs, output, and price deflators from other sources. As a result, we could assess several econometric models of the contribution of IS to firm-level productivity. Our results indicate that IS spending has made a substantial and statistically significant contribution to firm output. We find that the gross marginal product (MP) for computer capital averaged 81% for the firms in our sample. We find that the MP for computer capital is at least as large as the marginal product of other types of capital investment and that, dollar for dollar, IS labor spending generates at least as much output as spending on non-IS labor and expenses. Because the models we applied were similar to those that have been previously used to assess the contribution of IS and other factors of production, we attribute the different results to the fact that our data set is more current and larger than others explored. We conclude that the productivity paradox disappeared by 1991, at least in our sample of firms. [ABSTRACT FROM AUTHOR]

This study analyzes the effect of information technology on the efficiency of production operations in a specific manufacturing process. Survey data from 584 establishments engaged in the machining process in 21 different industries are used to construct and test an empirical model that takes into account product characteristics, the type of technology (computer-programmable automation or conventionally controlled) machines, the extent of technological change at the plant, process-specific characteristics such as the scale of operations and degree of customization, labor policies, and structural features of the organization of work. The results indicate that there is a significant efficiency advantage from using programmable automation technology and that technological advantages accumulate with experience and with the repeated opportunities for learning associated with large volume and frequent product changes. The most efficient use of this technology occurs in plants with work practices that involve a higher ratio of machines to workers (as in a cellular approach to manufacturing) and allow production workers to perform programming tasks to a greater degree. Unionized plants are also significantly more efficient than non-union plants. [ABSTRACT FROM AUTHOR]

This study compares the productivity of six major US and Japanese motor vehicle manufacturers—General Motors. Ford, Chrysler. Toyota. Nissan and Mazda—from the early 1950's through 1987. Techniques of productivity measurement, conventionally applied at the level of industries or national economies, are adapted for the analysis of individual firms. Several potential determinants of growth in productivity are evaluated, including economics of scale, adoption of ‘just-in-time’ manufacturing, and changes in top management. The results show that productivity improvement by the six motor vehicle producers was attained primarily through more efficient utilization of labor: long-term growth in capital productivity was negligible for most firms. The three Japanese producers had achieved higher labor productivity than their US counterparts by the late 1970's. More recently, though, differences among firms within each country have become large relative to the gap between the US and Japan. Early productivity growth for Japanese producers was derived in part from the achievement of scale economies, but this source of improvement was largely exhausted by the mid-1960's. In both countries, significant shifts in the growth rate and level of firm productivity have followed changes in top management. [ABSTRACT FROM AUTHOR]

Total productivity learning curve results are reported for several departments of an electronic equipment manufacturer with plants in the U.S., Europe and Asia. These results were used to focus qualitative field investigations into the behavioral and cognitive determinants of considerable diversity across departments in learning curve parameters. The field investigation suggested that three forms of shared learning are critical to manufacturing productivity improvement: ( 1 ) sharing across the Development/Manufacturing interface, (2) sharing between the primary location and plants that started up later, and (3) the ongoing sharing among plants after start-up. Innovations in each of these three processes are identified and mapped onto Daft and Lengel's information uncertainty/equivocality matrix. Implications for the role of manufacturing engineering are identified. [ABSTRACT FROM AUTHOR]

The purpose of the paper is to present the results of a comparative analysis of two main-line productivity measurement procedures: the American Productivity Center's total factor model, and the Ethyl Corporation's "Profitability = Productivity + Price Recovery" model. Several fundamental differences between the two approaches are identified and analyzed. As demonstrated in the paper, differences such as the method of deflation can substantially affect the proper choice of the more appropriate procedure to use in a given corporate setting. [ABSTRACT FROM AUTHOR]

This note develops optimal multiple rest break models for the case when the decay in work rate is an exponential function of time worked and recovery of work rate potential during rest is a linear function of time rested. While empirical evidence indicates that work rote decay functions tend to be best approximated by either exponential or linear functions, previous multiple rest break models were based upon a linear work rate decay function. Efficient solution procedures are developed which require only the solution of a transcendental equation using Newton's or an equivalent method. Although linear-linear and exponential-linear models are demonstrated to share some important general characteristics, a preliminary analysis indicated that use of linear-linear policies resulted in substantial sacrifices in productive output when relatively high rates of exponential decay were present. The observed losses were exacerbated by higher rates of recovery. [ABSTRACT FROM AUTHOR]

This paper focuses upon the maximization of labor productivity through selection of the optimal number, duration, and placement of rest breaks. It is demonstrated that resolution of the limited validity associated with previous models leads to a mixed-integer quadratic programming formulation of this problem. Efficient analytic procedures are developed which allow solutions to be obtained in minutes using a hand-held calculator. Then, the characteristics, properties, and potential effectiveness of optimal solutions are examined through an illustration from an existing work environment. Issues relevant to the implementation of the models are presented in a summary of an initial experiment in which one of the models in this paper was used to select rest break policy. The results of this experiment indicated that the output achieved using the model's policy was 13% higher than the output achieved when the subjects used their own rest break policies. Several future research topics are also identified. [ABSTRACT FROM AUTHOR]

The authors' purpose in this paper is to develop productivity-based sequential budgeting procedures designed to expedite identification of major problem areas in budgetary performance, as well as to reduce the costs associated with comprehensive zero-base analyses. The concept of total factor productivity is reviewed and its relations to ordinary and zero-based budgeting are discussed in detail. An outline for a selective sequential analysis based on monitoring of three key indicators of (a) implicitly budgeted total factor productivity; (b) revenue growth; and (c) profitability; is suggested. It is argued that this approach is instrumental in promoting a more systematic performance analysis, which is capable of revealing hidden efficiency shortfalls and is potentially cost and time saving. Additionally, this type of productivity-based budgeting is shown (via use of an actual application) to provide all the informational inputs for a full-fledged analysis of expected budgetary distribution of productivity gains among various categories of employees, shareholders and customers. [ABSTRACT FROM AUTHOR]

Technological innovation is widely seen as a means for raising productivity levels in state and local government. Growing evidence indicates that (1) senior level bureaucrats have primary responsibility for decisions concerning the adoption of innovations, and (2) innovations adopted by state and local governments are of two types -- cost-reducing and service-augmenting. A formal explanation is advanced for the apparent preference of bureaucrats for service-augmenting innovations. Service-augmenting innovations tend to increase agency budgets to which bureaucratic emoluments are positively correlated, to expand the clientele served by an agency, and to obscure agency production costs by simultaneously altering both the input mixes and the services being provided. Federal policies designed to foster a more rapid diffusion of technological innovations are, in part, based upon the expectation that technological innovations will lessen the budgetary pressures upon state and local governments. The analysis presented here suggests that there may be countervailing pressures within the adoption processes of state and local governments which weaken the implied relationship between technological change and productivity improvement. [ABSTRACT FROM AUTHOR]

In 1988, Byrnes, Fare, Grosskopf and Lovell define a decomposition of inefficiency differentials into scale and congestion components. This note shows that the decomposition may be sensitive to the order in which the two components are calculated, and, consequently, use of the decomposition may result in misleading signals being given to management. [ABSTRACT FROM AUTHOR]