TECHNOLOGY AND INFORMATION - CHAIN REACTIONS AND SUSTAINABLE ECONOMIC-GROWTH

Economic growth is sustained by development mechanisms that are somewhat similar to chain reactions. In the standard production paradigm this occurs through successive reorganizations and increasing use of 'hard' automation leading to scale economies and thus to greater efficiency. In turn, this leads to lower costs, lower prices and growing demand, which triggers a new reorganization, and so forth. Research and engineering development have been integrated into the same cyclic growth process. The advent of information-intensive 'flexible' manufacturing, with increasing emphasis on product variety and customization, raises the question of whether sustainable economic growth will still be possible in the 'new paradigm'. This is because flexible production is much less standardized. Hence capital-scale economies are more limited. Economies-of-scope through the joint use of production factors in a multi-product setting can only partially offset the loss of scale economies. We argue, however, that informational-scale economies will be achievable if (and only if) the use of information technologies in production per se is truly integrated with their use in other management functions, instead of being introduced ad hoc as is being done in most firms at present. © 1990.