Alternative frameworks for measuring technical progress and productivity
Any residually measured total factor productivity index confounds the productivity gains achieved from better inputs and greater organizational efficiency – movement toward the production function – with the output from process-related technological change. Of course, what may be classified as organizational or management efficiency in one firm or one industry could result from a technological breakthrough or an entrepreneurial insight in another firm or another industry. This relationship suggests the importance of technology diffusion on the measured productivity growth of any one firm or industry. Some do not view this as an issue at the aggregate level, except in the case of international technology transfer. However, it is an issue in the sense that the diffusion of technology supports new growth theory by emphasizing purposive actions in the identification, adoption, and implementation of others’ technology, that is, technological change is endogenous.