Assessing the technology contribution to value added

Technology and knowledge are two key components for economic growth; however, the two concepts are not consensually defined. This paper proposes a model to assess and quantify the technology contribution to the value-adding process. The methodological approach implied building an operational concept for technology that is independent of the concepts of knowledge and capital. As such, technology could be interpreted and quantified as an input parameter in a new production model. This model interprets and assesses, separately, the value contributions of the uses of technology, of knowledge and of capital in a production process, defining the Technology Index for that process. The model is applied to manufacturing sectors of seven European countries, quantifying their respective dependences on technology. A comparison of the Technology Index proposed here is made with the OECD's Technology Intensity factor, arguing that the former reflects the technology dependence better that the latter. Accordingly, a criterion for classifying the economic sectors' dependence on technology is proposed. A main contribution from this study is an objective classification criterion for technology dependence of firms and economic sectors. It also provides an easy benchmark procedure for knowledge and capital dependence between firms and sectors.

► The concepts of technology, knowledge and capital are reconstructed as operational concepts.
► A linear production function is proposed adding their contributions to value added.
► A Technology Index is defined and measured for economic activity sectors.