Introduction
To model how something is produced, think of a box that in one end takes in inputs such as labor (employees) and capital (equipment, buildings, etc.) and in another end spits out the final good. With this picture in mind now one can ask, how does technological progress affect production? One way of thinking is that technological progress affects specific inputs (arrows going in) such as equipment and buildings. To realize the benefits of such technological change for production, these inputs must be purchased. So for example, the advent of the microchip (an important technological improvement in computers) will affect the production of Ford cars only if Ford Motor Co.'s assembly plants (the red box) invest in computers with microchips (instead of computers with punched cards) and use them (they are one of the arrows going in the box) in the production of Mustangs (the arrow coming out). As the name suggests, this is investment-specific technological progress---it requires investing in new machines or buildings which contain or embody the latest technology. Notice that the term investment can be general: not only must a firm buy the new technology to reap its benefits, but it also must invest in training its workers and managers to be able to use this new technology (Greenwood & Jovanovic 2001) .
Read more about this topic: Investment-specific Technological Progress
Famous quotes containing the word introduction:
“Do you suppose I could buy back my introduction to you?”
—S.J. Perelman, U.S. screenwriter, Arthur Sheekman, Will Johnstone, and Norman Z. McLeod. Groucho Marx, Monkey Business, a wisecrack made to his fellow stowaway Chico Marx (1931)
“For better or worse, stepparenting is self-conscious parenting. You’re damned if you do, and damned if you don’t.”
—Anonymous Parent. Making It as a Stepparent, by Claire Berman, introduction (1980, repr. 1986)
“Such is oftenest the young man’s introduction to the forest, and the most original part of himself. He goes thither at first as a hunter and fisher, until at last, if he has the seeds of a better life in him, he distinguishes his proper objects, as a poet or naturalist it may be, and leaves the gun and fish-pole behind. The mass of men are still and always young in this respect.”
—Henry David Thoreau (1817–1862)