Innovative development of engineering companies using the methodology of production functions

Abstract

Introduction. Ukrainian national economy increases the dependence on global economic transformation under the influence of scientific and technological progress. It is impossible to provide sustainable economic development of domestic engineering companies without the implementation of innovative development strategy under such conditions.

Purpose. The article presents the developed method of analysis and the operational activities of the enterprise. The main idea of the presented method is achievement of certain results, such as: to estimate the “normal activity conditions” and corresponding “normal profit” of engineering company, to determine the causes and circumstances of “economic profit” (“excess рrofit”) and the level of the enterprise innovative development.

Method (methodology). The necessity to use new economic indicator “labor productivity” is proved and presented the method of its implementation in calculation of the "normal profit" of engineering enterprise, based on the methodology of production functions. “Labor productivity” characterizes the quantity of manufactured products in monetary units, which measured per unit of expended labor – materialized and living. This indicator allows estimating the “normal profit”. The definition of “normal activity conditions” involves the indicator of “labor productivity" with its maximum rate at the time of the most effective employment of living and materialized labor. This allows identifying the periods of the company generated economic profit (excess рrofit) and its derivation reasons – the main production or other operating activities.

Results. Presented method was tested on 12 Ukrainian engineering enterprises. Presented research exposes that the most common method to obtain economic profit (excess profits) is to create the conditions for production and sales increase taking into account minimal production costs (increase the economic efficiency of production factors – living and materialized labor). The proposed estimating method of normal activity conditions (normal manufacturing output productivity) and normal profit using the methodology of production function is provided in theory. Besides, this method allows identifying the level of innovative development of certain engineering companies.