Investment in Process Innovation: Technological Obsolescence in Australian Manufacturing

Jerry Courvisanos, School of Business, University of Ballarat, Australia

This is an empirical study of investment in process innovation for manufacturing industry. In examining the extent of technological innovation embodied in capital investment, this study identifies the nature technological obsolescence that is implied in this investment process. The empirics are from Australian manufacturing, but the model and the implications are applicable to any advanced capitalist economy. The research begins by identifying technological obsolescence from an approach devised by Wilfred Salter in his analysis of technical change. By defining obsolescence in terms of cost minimisation, Salter provides a method of identifying how and when firms find it profitable to invest in technological innovation embodied in the newest vintage capital equipment. Thus, technological innovation becomes endogenous to the investment process. Technical change in this paper is modelled as affecting the use of each input differently rather than reducing use of all inputs by a uniform proportion. Input-saving estimates calculated for different industries show obsolescence to be identified with the introduction of new equipment that is labour saving. This result enables the inclusion of labour saving as a proxy for technological innovation into an investment model based on the work of Michał Kalecki. With profits as the ability to invest factor, innovation as the inducement, the two factors combine for an explanation of the capitalist accumulation process.

About the speaker
Jerry Courvisanos is currently senior lecturer in Innovation and Entrepreneurship at the School of Business and the Centre for Regional Innovation and Competitiveness (CRIC), University of Ballarat. Jerry has been a consultant and adviser to local councils, regional development boards and social service organizations on effective methods of identifying economic strengths and establishing new activities, especially in non-metropolitan regional areas. Jerry was Visiting Scholar at MERIT from July 1999 to January 2000.

Jerry’s research interest is in extending the work of Michal Kalecki on cycles and growth into the areas of enterprise development and innovation through the evolutionary process and behavioural analysis. Theoretical concerns centre on understanding the processes of innovation (including R&D) and how they affect investment spending, business cycles, long-term growth and ecological sustainable development. This work informs applied research into how innovation and entrepreneurial activity can best be applied to ecological and regional development in Australia and globally.

Date: 04 June 2007

Time: 12:30