Productivity & Efficiency in Traditional and Digital Economies

Vocabulary flashcards summarising key terms and definitions from the lecture on productivity, efficiency, ICT impact, and DEA.

Productivity

Ratio of produced output to used inputs while holding product quality constant (Grönroos).

Partial Productivity

Output divided by a single input factor (e.g., labor productivity).

Inputs

All production factors—labor, capital, raw materials, technology—plus the value of information resources.

Outputs

Goods or services generated by a production process.

Efficiency

Expected resources to be used divided by resources actually used; targets the denominator of the productivity fraction.

Effectiveness

Actual production result divided by expected result; influences the numerator of the productivity fraction.

Technical Efficiency

Ability to obtain maximum possible output from a given set of inputs.

Allocative (Distributive) Efficiency

Ability to use inputs in optimal proportions given their prices and production technology.

Functional Productivity (Service Systems)

Function of operational outputs (revenue, customers) over business inputs (materials, customers, labor, service costs).

Customer-Side Productivity

Function of customer outcomes (experience, perceived value) over customer inputs (waiting time, effort, price).

Faster Customer Flow – Operational Impact

Significant output rise with marginal input rise and unchanged staff → higher functional productivity.

Faster Customer Flow – Customer Impact

Lower stay time and perceived value, steady effort & price → lower customer-side productivity.

Knowledge Worker

Highly educated or specialized employee whose job involves creating, disseminating or applying knowledge.

Productivity Measurement (Knowledge Work)

Process of quantifying output/input for knowledge workers, often indirectly due to task complexity.

Quantity of Work Dimension

Most common metric for knowledge-worker productivity (71 % usage).

Cost / Profit Dimension

Use of expenses or profitability to gauge productivity (38 % usage).

Timeliness / Schedule Accuracy

Adherence to planned time targets (33 % usage).

Autonomy

Degree of self-direction considered in productivity metrics (21 % usage).

Quality (Work Output)

Assessment of how well outputs meet specifications (21 % usage).

Innovation / Creativity

Metric capturing novel ideas or solutions (17 % usage).

Customer Satisfaction

Client perception of delivered value (17 % usage in productivity studies).

Function Point Analysis

Software-industry method: productivity = function points produced ÷ programming hours (Bok & Raman).

Function-Based Productivity Measurement

Three-step method separating routine vs nonroutine tasks, mapping task traits to performance, and building mathematical models (Ray & Sahu).

Earned-Hours Efficiency Formula

Efficiency = Σ(Ni × Si) ÷ ΣRj, relating standard task hours to available resource hours (Klassen, Russell & Chrisman).

Value-Based Productivity Formula

Productivity = Σ(Ni × Vi) ÷ Σ(Rj × Pj), weighing service units by value and resource hours by variable cost.

Productivity Paradox

Observation that widespread IT adoption did not initially appear in productivity statistics (Solow 1987).

Robert Solow Quote

"You can see the computers everywhere but in the productivity statistics."

Robert Gordon Finding

1995-99 U.S. productivity gains came solely from durable-goods manufacturing like computers and chips.

ICT (Information & Communication Technologies) Investments

Expenditures on hardware, software and networks aimed at boosting productivity.

Network Externalities

Situation where a product becomes more valuable as its user base grows, amplifying ICT’s productivity effect.

Reasons for Productivity Paradox

Measurement gaps, low initial ROI, rising computer usage costs, time lags, user limitations, and alternative major technologies.

Data Envelopment Analysis (DEA)

Non-parametric method measuring relative efficiency with multiple inputs and outputs without assuming a functional form.

Decision Making Unit (DMU)

Individual entity (e.g., firm, hotel) whose efficiency is evaluated in DEA.

DEA Efficiency Score (θ)

Ratio of weighted outputs to weighted inputs; equals 1 for efficient units, <1 otherwise.

Lambda Weights (λ)

Peer coefficients in DEA that form the reference (efficient) composite for each inefficient DMU.

Improvement Percentage to Full Efficiency

Degree (1 – θ) a DMU must enhance outputs or reduce inputs to reach efficiency (e.g., 12.6 % for Hotel 1).

Frontier Production Curve (PP')

Boundary of technically efficient points; productivity varies along the curve based on output-input slope.

ICT Skill Complementarity

ICTs leverage human skills more than other capital forms, enhancing productivity potential.

Operational Outputs

Measurable service-system results such as revenue or customers served.

Waiting Time

Duration customers spend before service; an input in customer productivity calculations.