Review of Industrial Organization 16: 327–342, 2000.
© 2000 Kluwer Academic Publishers. Printed in the Netherlands.
The Impact of High Tech Production Techniques on
Productivity and Proﬁtability in Selected U.S.
LOUIS H. AMATO
and CHRISTIE H. AMATO
University of North Carolina at Charlotte, 9201 University City Blvd., Charlotte, NC 28223, U.S.A.
Abstract. This paper examines the impact of high technology on multifactor productivity and price-
cost margins. Principal components obtained from ﬁve technology variables are related to multifactor
productivity and price-cost margin. A negative and signiﬁcant relationship between price-cost margin
and high technology methods when industry effects are excluded, becomes insigniﬁcant in the in-
dustry effects speciﬁcation. The price-cost margin equations suggest that prior ﬁndings of a negative
relationship between proﬁtability and high technology may result from omitting industry effects. For
multifactor productivity, there is a positive impact from high technology regardless of whether the
speciﬁcation includes industry effects.
Key words: High technology, multifactor productivity, proﬁtability.
Industrial economists have long recognized the importance of technological in-
novation and productivity growth to economic welfare. Since the early 1980’s,
the potential for high technology information (high tech) to improve productivity
growth, stimulate high wage employment opportunities, and enhance the compet-
itiveness of U.S. industries has been widely acknowledged. Unfortunately, little
empirical work focusses directly on the impact that investments in high tech
methods have had on the competitiveness of U.S. manufacturing industries.
Evidence exists that U.S. ﬁrms are increasingly turning to high tech as a means
of improving productivity. A 1988 Census Bureau report (U.S. Census Bureau,
Current Industrial Reports: Manufacturing Technology, 1988) cites an increasing
proportion of U.S. ﬁrms using high tech methods. Although the productivity and
employment enhancing potential of investment in high tech has received consid-
erable attention, little empirical research has examined the impact of high tech
investment on productivity and proﬁtability in U.S. manufacturing. Gullickson
and Harper (1987) found that multifactor productivity experienced a forty per-
The authors wish to acknowledge the contributions of Christopher T. Bonnett, former graduate
student in economics, to this paper.