Productivity, Energy Intensity and Output: A Unit Level Analysis of the Indian Manufacturing Sector

Abernathy (1978) suggested that a firm’s focus on productivity gains inhibited its flexibility and ability to innovate. Abernathy observed that in the automobile industry, a firm’s economic decline was directly related to its efficiency and productivity efforts. He suggested that a firm’s ability to compete over time was rooted not only in increasing efficiency, but also in its ability to be simultaneously innovative. This relationship between productivity and efficiency is coined as the Productivity dilemma hypothesis. Abernathy’s (1978) productivity dilemma arises because mature processes provide few natural opportunities for learning. In mature processes, activities proceed according to plan, accidents and exceptions are rare, and external stimuli are filtered and buffered to prevent them from disrupting routine operation.

The model in Eq. (1) is a gross output function and the discussion in “Methodology” is about applying the LP methodology to a gross output function. In the present paper, the LP methodology has been applied to a value added function. For an application of the LP production function, see Martín-Barroso et al. (2015).