Impact of technology investment on firm’s production efficiency factor in manufacturing

    Martina Novotná   Affiliation
    ; Tomáš Volek   Affiliation
    ; Michael Rost Affiliation
    ; Jaroslav Vrchota Affiliation


The goal of this paper is to investigate the impact of technology investments on production efficiency in manufacturing companies and how different these relationships are for low-technology and high-technology companies. The empirical part was based on the analysis of 2,848 large, small and medium-sized Czech companies by using Bayesian networks (BNs). The results show that technological investments have the greatest positive impact on the growth of labour productivity and on a decline in labour intensity in low technology enterprises. The technological investments have a positive impact on labour productivity growth in high-technology enterprises, but at the same time, the technological investments have an impact on the increase of labour intensity. On the contrary, the influence of investment growth was insignificant on the indicators of material and services intensity. Technologically intensive investments have a different impact on small, mediumsized and on large enterprises. The reaction of large companies depends on the category of technology intensity in contrast to small and medium-size enterprises.

First published online 17 November 2020

Keyword : performance, technology investment, Bayesian networks, manufacturing, technological intensity, labour productivity

How to Cite
Novotná, M., Volek, T., Rost, M., & Vrchota, J. (2021). Impact of technology investment on firm’s production efficiency factor in manufacturing. Journal of Business Economics and Management, 22(1), 135-155.
Published in Issue
Jan 27, 2021
Abstract Views
PDF Downloads
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.


Aldieri, L., Cincera, M., Garofalo, A., & Vinci, C. P. (2008). Micro evidence of the effects of R&D on labour productivity for large international R&D firms. International Journal of Manpower, 29(3), 198–215.

Badescu, M., & Garcés-Ayerbe, C. (2009). The impact of information technologies on firm productivity: Empirical evidence from Spain. Technovation, 29(2), 122–129.

Bahrin, M. A. K., Othman, M. F., Azli, N. N., & Talib, M. F. (2016). Industry 4.0: A review on industrial automation and robotic. Jurnal Teknologi, 78(6–13), 137–143.

Barro, R. J., & Sala-i-Martin, X. (2004). Economic growth (2nd ed.). MIT Press.

Bartodziej, C. J. (2017). The concept industry 4.0. An empirical analysis of technologies and applications in production logistics (pp. 27–50). Springer Gabler, Wiesbaden.

Basile, R., & De Benedictis, L. (2008). Regional unemployment and productivity in Europe. Papers in Regional Science, 87(2), 173–192.

Baumann, J., & Kritikos, A. S. (2016). The link between R&D, innovation and productivity: Are micro firms different? Research Policy, 45(6), 1263–1274.

Becchetti, L., Bedoya, D. a. l., & Paganetto, L. (2003). ICT investment, productivity and efficiency: Evidence at firm level using a stochastic frontier approach. Journal of Productivity Analysis, 20(2), 143–167.

Beugelsdijk, S., Klasing, M. J., & Milionis, P. (2018). Regional economic development in Europe: The role of total factor productivity. Regional Studies, 52(4), 461–476.

Birkel, H. S., Veile, J. W., Mueller, J. M., Hartmann, E., & Voigt, K.-I. (2019). Development of a risk framework for industry 4.0 in the context of sustainability for established manufacturers. Sustainability, 11(2), 384.

Blažková, I., & Dvouletý, O. (2019). Investigating the differences in entrepreneurial success through the firm-specific factors. Journal of Entrepreneurship in Emerging Economies, 11(2), 154–76.

Borin, A., & Mancini, M. (2016). Foreign direct investment and firm performance: An empirical analysis of Italian firms. Review of World Economics, 152, 705–732.

Brettel, M., Friederichsen, N., Keller, M., & Rosenberg, N. (2014). How virtualization, decentralization and network building change the manufacturing landscape: An industry 4.0 perspective. International Journal of Mechanical, Industrial Science and Engineering, 8(1), 37–44.

Büchi, G., Cugno, M., & Castagnoli, R. (2020). Smart factory performance and Industry 4.0. Technological Forecasting and Social Change, 150, 119790.

Chung, H. (2018). ICT investment-specific technological change and productivity growth in Korea: Comparison of 1996–2005 and 2006–2015. Telecommunications Policy, 42(1), 78–90.

Dosi, G., Grazzi, M., & Moschella, D. (2015). Technology and costs in international competitiveness: From countries and sectors to firms. Research Policy, 44(10), 1795–1814.

Driffield, N., & Temouri, Y. (2014). Inward investment and the drivers of post recession recovery in Germany. Jahrbucher Fur Nationalokonomie Und Statistik, 234(6), 775–799.

Egger, P., & Pfaffermayr, M. (2001). A note on labour productivity and foreign inward direct investment. Applied Economics Letters, 8(4), 229–232.

Eichhorst, W., Hinte, H., Rinne, U., & Tobsch, V. (2017). How big is the gig? Assessing the preliminary evidence on the effects of digitalization on the labor market. Mrev Management Revue, 28(3), 298–318.

EUR-Lex. (2003). Commission recommendation. Official Journal of the European Union L, 124, 36–41.

Eurostat (n.d.). Aggregations of manufacturing based on NACE Rev. 2. Eurostat indicators on High-tech industry and Knowledge – intensive services. Annex 3 – High-tech aggregation by NACE Rev.2.

Eurostat. (2019). National accounts aggregates by industry.

Filippetti, A., & Peyrache, A. (2015). Labour productivity and technology gap in European regions: A conditional frontier approach. Regional Studies, 49(4), 532–554.

Freeman, C., & Perez, C. (1988). Structural crisis of adjustment, business cycles and investment behaviour. G. Dosi, C. Freeman, R. Nelson, G. Silverberg, & L. Soete (Eds.), Technical change and economic theory (pp. 38–66). Pinter.

Geissbauer, R., Vedso, J., & Schrauf, S. (2016). Industry 4.0: Building the digital enterprise: 2016 global industry 4.0 survey. PwC, Munich.

Gibson, D. V., & Naquin, H. (2011). Investing in innovation to enable global competitiveness: The case of Portugal. Technological Forecasting and Social Change, 78(8), 1299–1309.

Girma, S., Greenaway, D., & Wakelin, K. (2001). Who benefits from foreign direct investment in the UK? Scottish Journal of Political Economy, 48(2), 119–133.

Grubicka, J., & Matuska, E. (2015). Sustainable entrepreneurship in conditions of un (safety) and technological convergence. Entrepreneurship and Sustainability Issues, 2(4), 188–197.

Guest, R. (2011). Population ageing, capital intensity and labour productivity. Pacific Economic Review, 16(3), 371–388.

Haller, S. A. (2014). Do domestic firms benefit from foreign presence and import competition in Irish services sectors? The World Economy, 37(2), 219–243.

Hartemink, A. J. (2001). Principled computational methods for the validation and discovery of genetic regulatory networks [PhD thesis, School of Electrical Engineering and Computer Science]. Massachusetts Institute of Technology.

Hawash, R., & Lang, G. (2020). Does the digital gap matter? Estimating the impact of ICT on productivity in developing countries. Eurasian Economic Review, 10(2), 189–209.

Heidenreich, M. (2009). Innovation patterns and location of European low- and medium-technology industries. Research Policy, 38(3), 483–494.

Jardim-Goncalves, R., Romero, D., & Grilo, A. (2017). Factories of the future: challenges and leading innovations in intelligent manufacturing. International Journal of Computer Integrated Manufacturing, 30(1), 4–14.

Jiang, J., Su, P., & Ge, Z. (2020). The high- and new-technology enterprise identification, marketization process and the total factor productivity of enterprise. Kybernetes.

Kijek, T., & Kijek, A. (2019). Is innovation the key to solving the productivity paradox? Journal of Innovation & Knowledge, 4(4), 219–225.

Koller, D., & Friedman, N. (2009). Probabilistic graphical models: principles and techniques. MIT Press.

Kraft, J., & Kraftova, I. (2012). Innovation – globalization – growth (selected relations). Inzinerine Ekonomika-Engineering Economics, 23(4), 395–405.

Kraftova, I., Mateja, Z., & Prasilova, P. (2011). Economic performance: variability of businesses within each industry and among industries. Inzinerine Ekonomika-Engineering Economics, 22(5), 459–467.

Leitmanova, I. F., & Krutina, V. (2009). Monitoring the efficiency of regions – value added utilization (with a View to South Bohemia Region). Ekonomicky Casopis, 57(10), 1018–1037.

Leung, D., Meh, C., & Terajima, Y. (2008). Firm size and productivity (Working Paper No. 2008, 45). Bank of Canada.

MacDougall, W. (2014). Industrie 4.0: smart manufacturing for the future. Trade & Invest, Germany.

Machek, O., & Hnilica, J. (2012). Total factor productivity approach in competitive and regulated world. Procedia – Social and Behavioral Sciences, 57, 223–230.

Mařík, V., Beran, H., Bízková, R., Bunček, M., Burčík, J., Burget, P., & Burian, J. (2016). Industry 4.0 – the initiative for the Czech Republic. The Report Approved by the Government of the Czech Republic on August, 23, 2016.

Müller, J. M., Buliga, O., & Voigt, K.-I. (2018). Fortune favors the prepared: How SMEs approach business model innovations in Industry 4.0. Technological Forecasting and Social Change, 132, 2–17.

Mura, L., Ključnikov, A., Tvaronavičienė, M., & Androniceanu, A. (2017). Development trends in human resource management in small and medium enterprises in the Visegrad Group. Acta Polytechnica Hungarica, 14(7), 105–122.

Nagarajan, R., Scutari, M., & Lebre, S. (2013). Bayesian networks in r with applications in systems biology. Springer-Verlag, New York.

OECD stat. (2019). Gross domestic product (GDP).

OECD/Eurostat. (2005). Oslo manual: guidelines for collecting and interpreting innovation data (3rd ed.) OECD Publishing, Paris.

Ortega-Argilés, R., Piva, M., & Vivarelli, M. (2015). The productivity impact of R&D investment: Are high-tech sectors still ahead? Economics of Innovation and New Technology, 24(3), 204–222.

Parisi, M. L., Schiantarelli, F., & Sembenelli, A. (2006). Productivity, innovation and R&D: Micro evidence for Italy. European Economic Review, 50(8), 2037–2061.

Pearl, J. (1988). Probabilistic reasoning in intelligent systems: networks of plausible inference. Morgan Kaufmann, Los Angeles.

Poor, P., & Basl, J. (2019, February 5–6). Readiness of companies in relation to industry 4.0 implementation. In P. Jedlicka, P. Maresova, & I. Soukal (Eds.), International Scientific Conference “Hradec Economic Days” (Vol. 9, pp. 236–248). Univ Hradec Kralove.

Preenen, P., Vergeer, R., Kraan, K., & Dhondt, S. (2015). Labour productivity and innovation performance: The importance of internal labour flexibility practices. Economic and Industrial Democracy, 38, 1–23.

Ramírez, S., Gallego, J., & Tamayo, M. (2019). Human capital, innovation and productivity in Colombian enterprises: A structural approach using instrumental variables. Economics of Innovation and New Technology, 29(6), 1–18.

Río, F. D., & Lores, F. X. (2019). The decline in capital efficiency and labour share. Economica, 86(344), 635–662.

Romer, P. (1990). Endogenous technological change. Journal of Political Economy, 98(5), 71–102.

Rüßmann, M., Lorenz, M., Gerbert, P., Waldner, M., Justus, J., Engel, P., & Harnisch, M. (2015). Industry 4.0: The future of productivity and growth in manufacturing industries. Consulting Group, Boston.

Scutari, M. (2010). Learning bayesian networks with the bnlearn r package. Journal of Statistical Software, 35(3), 1–22.

Scutari, M. (2017). Bayesian network constraint-based structure learning algorithms: Parallel and optimized implementations in the bnlearn R package. Journal of Statistical Software, 77(2), 1–20.

Scutari, M., & Denis, J. B. (2014). Bayesian networks with examples in r (1st ed.). CRC Press, Taylor & Francis Group, Boca Raton.

Seo, H. S., & Kim, Y. (2020). Intangible assets investment and firms’ performance: Evidence from small and medium-sized enterprises in Korea. Journal of Business Economics and Management 20(2), 421–445.

Spiezia, V. (2012). ICT investments and productivity: Measuring the contribution of ICTS to growth. OECD Journal: Economic Studies, 2012(1), 199–211.

Stock, T., & Seliger, G. (2016). Opportunities of sustainable manufacturing in industry 4.0. In G. Seliger, H. Kohl, & J. Mallon (Eds.), 13th Global Conference on Sustainable Manufacturing – Decoupling Growth from Resource Use. Procedia CIRP, 40, 536–541.

Stundziene, A., & Saboniene, A. (2019). Tangible investment and labour productivity: Evidence from European manufacturing. Economic Research-Ekonomska Istraživanja, 32(1), 3519–3537.

Syverson, C. (2011). What determines productivity? Journal of Economic Literature, 49(2), 326–365.

Takahashi, T. (2012). Capital growth paths of the neoclassical growth model. PLOS ONE, 7(11), e49484.

Tambe, P., & Hitt, L. (2011). The productivity of information technology investments: New evidence from IT labor data. Information Systems Research, 23(3), 599–848.

Tello, M. (2015). Firms’ innovation, public financial support, and total factor productivity: The case of manufactures in Peru. Review of Development Economics, 19.

Tello, M. (2017). Innovation and productivity in services and manufacturing firms: The case of Peru: Mario D. Tello. CEPAL Review, 121, 69–86.

Thatcher, M. E., & Oliver, J. R. (2001). The impact of technology investments on a firm’s production efficiency, product quality, and productivity. Journal of Management Information Systems, 18(2), 17–45.

Trexima. (2018). The role and level of labour productivity in the Czech Republic.

Ulku, H. (2007). R&D, innovation, and growth: Evidence from four manufacturing sectors in OECD countries. Oxford Economic Papers, 59(3), 513–535.

Van Ark, B. (2016). The productivity paradox of the new digital economy. International Productivity Monitor, 31, 3–18.

Van Beveren, I. (2012). Total factor productivity estimation: A practical review. Journal of Economic Surveys, 26(1), 98–128.

Vokoun, M. (2016) Innovation behaviour of firms in a small open economy: The case of the Czech manufacturing industry. Empirica, 43(1), 111–139.

Wakelin, K. (2001) Productivity growth and R&D expenditure in UK manufacturing firms. Research Policy, 30(7), 1079–1090.

Wolter, M. I., Mönnig, A., Hummel, M., Schneemann, C., Weber, E., Zika, G., & Neuber-Pohl, C. (2015). Industry 4.0 and the consequences for labour market and economy: Scenario calculations in line with the BIBB-IAB qualifications and occupational field projections. Institute for Employment Research, Nuremberg, Germany.

Zawislak, P. A., Fracasso, E. M., & Tello-Gamarra, J. (2018). Technological intensity and innovation capability in industrial firms. Innovation & Management Review, 15(2), 189–207.