Productivity and micro economic growth : an accounting measure approach

As productivity is accepted as a prime determinant of macro economic growth and as the macro economy constitutes an aggregation of micro economic components, the link between productivity and growth at the micro economic (or firm) level warrants further investigation. The objective of this paper is to investigate this relationship between productivity and micro economic growth and to simultaneously address the specific concerns of both management and labour with regard to productivity initiatives. After presenting a conceptual framework for productivity accounting and introducing the strategic implications of productivity related information, the paper progresses onto an empirical study into the relationship between productivity and firm specific growth. This empirical study uses various correlation models applied to a sample of companies to statistically test the relationship between productivity and various measures of firm specific growth. Of particular relevance to this study is the use of appropriate growth measures based on the firms' strategic objectives and on factors directly related to the specific issues being addressed, as opposed to a single growth measure applied indiscriminately across the entire sample of companies. After investigating the relationship between productivity and micro economic growth (as appropriately defined), the empirical study concludes that the concerns cited by both management and labour as reasons for their respective aversions to productivity initiatives are unfounded The empirical study also offers preliminary evidence to support the use of the price recovery term as an indication of strategic objective. This paper concludes by proposing that the links introduced here between productivity and micro economic growth serve as a basis for the inclusion of micro economic factors into future research into the relationship between productivity and growth