Improving productivity via technology and management

An effective way for improving productivity considered by most people is by raising the level of technology. However, without the support of sound management systems, the contribution of technology to productivity is limited. As an empirical verification, four major factors of automation technology are evaluated for fifteen machinery firms in Taiwan to constitute a composite index as an indicator of the achievement of technology. Similarly, eighteen subjects concerning production management are evaluated to result in an index for management. To construct a productivity frontier as a function of the two indices, a total factor productivity is also calculated. The productivity frontier shows the maximal attainable productivity at different levels of technology and management. It is worthwhile to note that, in the sampled firms, management presents a much stronger effect on productivity than technology does. With an isoquant analysis, a firm is able to derive a strategy to improve productivity taking time and budget into account. Although the discussion is confined to machinery firms, the methodology developed in this study is applicable to other industries.