Elias Sanidas and Wonkyu Shin
The role of organizational technological innovations in economic development is empirically examined in this paper. The recent inventory trends since the 1980s have two interesting characteristics at the macro-level. First, the inventories have been declining over time. Second, the developed countries have smaller changes in inventories than that of the developing. At the firm-and-industry level, previous studies identify this recent trends in the context of modern production systems such as just-in-time and lean production as one source of economic growth especially for the case of developed countries. However, this phenomenon has highlighted less at the country level. Thus, we highlight the nexus between these recent inventory trends and economic growth which leads us to the following hypothesis: the long term declining trend of inventories ratio either over GDP or total capital investment exerts a significantly positive impact on economic development. By using 31 years of relevant panel data of 88 and up to 152 countries and by using panel data econometric techniques, we find that there exists a robust positive relationship between reduction and smaller changes in inventories and economic growth (GDP per capita growth) and economic development (GDP per capita level) across the globe.
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