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British Journal of Applied Science & Technology

5(3): 217-232, 2015, Article no.BJAST.2015.021


ISSN: 2231-0843

SCIENCEDOMAIN international
www.sciencedomain.org

The Seven Factors of Production


Sunday Okerekehe Okpighe1*
1
Department of Project Management Technology, Federal University of Technology, Owerri, Nigeria.

Author’s contribution

This whole work was carried out by the author SOO.

Article Information

DOI: 10.9734/BJAST/2015/12080
Editor(s):
(1) Xueda Song, Department of Economics York University, Canada.
Reviewers:
(1) Anonymous, East China University of Science, China.
(2) Anonymous, Katarzyna Rostek, Warsaw University of Technology, Poland.
(3) Lam Wong, Engineering, Cuyahoga Community College, USA.
(4) Anonymous, Jimma University, Ethiopia.
(5) Ali Besharat, Economics, University of Tabriz , Iran.
(6) Md. Moyazzem Hossain, Department of Statistics, Islamic University, Kushtia-7003, Bangladesh.
Complete Peer review History: http://www.sciencedomain.org/review-history.php?iid=760&id=5&aid=6609

th
Received 17 June 2014
th
Review Article Accepted 20 August 2014
rd
Published 23 October 2014

ABSTRACT

The review of the Factors of Production is reported. The dynamics and response of globalization
has rubbished the age long definition of factors of production. General management as entrenched
in operations and production in the past centuries gave birth to non-responsive and dormant
factors of production which dictated public service bureaucracy. Information and Time change
were of no essence. Bureaucracy has been swept off the stage in the face of the emerging
technology-driven global markets were competitiveness demands that the consumer/customer is
king. In this era, Information and Time are considered of great essence to the success or failure of
products/project delivery to the consumer. Consequent on the above, the review has revealed
seven factors of Production which are relevant and sufficient to drive the global markets.

Keywords: Productivity; production factors; machines; information; time.

1. INTRODUCTION mutually exclusive. They were comprehensive,


including all economic agents. Each was also "a
The classical economists treated land as distinct constraint," meaning at least some quantity of
from capital: "land, labour and capital" were the each of the factors was needed for all economic
three basic "factors of production". They were activity. Neo-classical economists denied the
_____________________________________________________________________________________________________

*Corresponding author: E-mail: eloziconsultants@yahoo.com;


Okpighe; BJAST, 5(3): 217-232, 2015; Article no.BJAST.2015.021

distinction and undertook to purge land from by human activities incident to occupancy and
economics. Many of them, following John B. production. In contrast, capital depreciates from
Clark and Frank Knight, still deny the distinction. time and use, routinely and by nature. After being
Many treat the matter by seizing on and stressing formed, it must be conserved from entropy by
all similarities of land and capital, while ignoring continual maintenance, repair, remodelling,
all differences. Some invent gray areas that safeguarding against theft and fire et cetera. Like
seem to fuse land and capital, present them as our own bodies, it returns to dust; land is the dust
typical, and quickly move on. Many more simply to which it returns. Inventories are depleted;
ignore. The market exchange of capital for land moving parts wear out; fixed capital depreciates
causes an elementary failure in the minds of with use and time. Land normally does not
many. Land and capital each have their prices depreciate as a function of time. Most attributes
and may be bought and sold for money [1]. Each of land also withstand use and abuse. Most land
alike is part of an individual's assets, colloquially is, rather, expected to appreciate in real value in
called his "capital". Each is a store of value to the the long run. Values go in cycles, but the secular
individual. What is true of each individual must history is upwards as population, capital, and
be true for all together, is the thinking: it is the demands all grow while land remains fixed.
"fallacy of composition." Production economics Capital has a period of formation during which it
deals with the optimal combination of inputs in creates value by storing up other inputs and
production, and how this relates to their relative changing physical form, but that is a phase.
costs. That should lead right into factor Once formed, almost all capital fails with time.
distribution, but this aspect is softpeda1ed or Perhaps the most durable capital is intellectual,
omitted entirely. This omission alone is a fatal like the writings of Plato [1]. "Land" in economics
fault, considering that the forces determining land means all natural resources and agents, with
rents vary inversely with those determining rates their sites (locations and extensions in space).
of return on capital Within production economics, Land is not just the matter occupying space: it is
"variable proportions" with "factor symmetry" space. It includes many things not colloquially
replaces diminishing returns [1]. The parcel of called land, such as water and the beds under it,
land disappears as a unit of analysis, replaced by the radio spectrum, docks, rights of way, take-
"the firm," a disembodied spirit that combines off/landing time slots for aircraft, aquifers,
resources optimally, treating all alike as variable ambient air (the right to breathe it and the license
"in the long run." In the "short run," land is to pollute), "air rights" to strata in the third
subsumed in "fixed costs"; rising demand that dimension of cities, falling water, wild fish, game,
raises rents is just "imputed away" silently and and vegetation, natural scenery, weather, the
lumped with other elements of "fixed cost. Time environment, the ecology, the natural gene pool,
is also referred to under "history of economic etc [1]. The basis of agricultural production and
thought," as an obsession of some 19th century the most important production factor for the
Austrians who wrote quaintly of "roundabout" farmers is land. By means of it, they can use
(time-using) methods of production. Relations of their labour (and capital) in order to earn their
sequence are found in macro, but not firmly livelihood. In traditional agriculture, more land
integrated with micro theory, which is the also means more income and a better life, and
enduring core of the discipline. Micro theory still increasing the size of the faun was a simpler way
deals with relations of coexistence in time, and of improving the living conditions than farming
space as well. The life of capital, like that of the existing land more intensively. This was the
people, is marked by major sacraments of birth, source of the inclination to buy land that is still
growth, aging and death - all missing from micro found in agrarian societies [2]. The possibilities of
theory. Micro deals mainly with how existing increasing the area of land are, however, limited.
resources are allocated at a moment in time, not Land cannot be enlarged or increased beyond
how they originate, grow, flourish, reproduce, that which it is, and when all of the land has been
age, die, and decompose [1]. Capital occupies put under cultivation, growing populations lead to
space; land is space. In common micro theory, continually smaller farms. This is why land has
resources and markets come together at a point the reputation of being a scarce production factor
not just in time but in space. Again, it excludes [2]. If the system of land management is
from its purview one of the prime qualities of improved, the scarcity of land is reduced by more
land. For the reasons given, alone, land and intensive cultivation. An improvement in the
capital are mutually exclusive. Land as "site" agrarian structure creates the precondition for
(location plus extension) does not normally wear appropriate management and land use systems,
out, depreciate, spoil, obsolesce, nor get used up a purposeful integration of animal husbandry and

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much more. The farmer's major instrument for 1) Deterioration in climatic conditions,
achieving a good output is labour. Labour has a 2) Depletion of water and fossil energy
direct effect if by means of investing a greater resources
amount of it the output is increased. Indirectly, 3) Soil degradation,
labour can have an effect on the production via 4) Economic liberalism [4].
capital formation [2]. In densely populated
agrarian societies, labour is an abundant All economists give the factors of production as
production factor, especially in relation to land three -- land, labour and capital. And without
and capital. This results, in extreme cases, in exception that I know of, they name them in this
land being substituted for by labour [2]. The order. This, indeed, is the natural order; the
productivity of the labour would be raised if the order of their appearance. The world, so far as
agrarian structure could develop a more political economy takes cognizance of it, began
balanced ratio between labour and land. The with land. Reason tells us that land, with all its
precondition for this could be to raise the abilities powers and potentialities, including even all
of those cultivating the soil to a higher level [2]. vegetable and animal life, existed before man
was, and must have existed before he could be.
Vegetables are not only beneficial for their But whether still "formless and void," or already
contribution to the share of agriculture in the instinct with the lower forms of life, so long as
economy of Swaziland, but also have a there was in the world only the economic
significant probability to compete where there are element land, production in the economic sense
fewer government regulations and restrictions in could not be, and there was no wealth. When
the economy. Currently, the local demand for man appeared, and the economic element
vegetables is higher than local production and labour was united to the economic element
hence the gap is filled by imports from South land, production began, and its product, wealth,
Africa. The results of an investigation showed resulted. At length (for in the myths and poems
that the factors that significantly affected in which mankind have expressed all the wisest
productivity of vegetable farmers were access to could tell of our far beginnings they have always
credit, selling price, fertiliser quantity, distance to loved to picture a golden age devoid of care), or
market and gender of the farmer [3]. more probably almost immediately (for the very
first of our race must have possessed that
The starting point of agricultural production is reason which is the distinguishing quality of
land resources. Large land resources are man), the greater power that could be gained by
available in Australia, North America and New using wealth in aid of labour was seen, and a
Zealand (respectively 671, 155 and 69 ha per third factor of production, capital, appeared [5].
person employed in agriculture). In Western But between this third factor and the two factors
Europe the corresponding figure is less than 12 which precede it, a difference in nature and
hectares. Among developing countries, no region importance is to be noted. Land and labour are
has the land resources such as North America original and necessary factors. They cannot be
and Australia. Only in Latin America that a resolved into each other, and they are
relatively high rate of agricultural land of 13.8 ha indispensable to production, being necessary to
per person exist. In developing countries as a production in all its modes. But capital is not an
whole, one villager has only 2.2 hectares; the original factor. It is a compound or derivative
world average stands at 3.7 hectares of factor, resulting from the union of the two
agricultural land per person. No less important is original factors, land and labour. Capital is not
the amount of cultivated land (arable land). In indispensable to production, being necessary,
recent decades, it is consistent with population not in all modes of production, but only in some
growth in the world and remained at a level of modes. Nevertheless, the part that it bears in
0.24 hectares per capita. But in poor countries in production is so separable, and the
Asia, Africa and Latin America the usage of convenience that is served by distinguishing it
agricultural land has been reduced. Under these from the original factors is so great, that it has
conditions, an increase in production is ensured been properly recognized by the earliest and by
through the intensification of production: all subsequent writers in political economy as a
chemical application, agricultural irrigation and separate factor; and the three elements by
scientific breeding [4]. Reliability of food supplies whose union wealth is produced in the civilized
globally has been threatened by four major state are given by the names and in the order of
hazards in this century: (1) land, (2) labour, and (3) capital [5]. A factor
of production may be defined as that good or

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service which is required for production. A factor and interest, and to decide the quantities of
of production is indispensable for production each needed for production. This is known as
because without it no production is possible. It organisation. Organisation refers to the services
is customary to attribute the process of of an entrepreneur who controls, organises and
production to three factors, land, labour and manages the policy of a firm, innovates and
capital, to which we add organisation [6]. In undertakes all risks [6].
economics, land as a factor of production does
not refer only to the surface of land but to all Benham has objected to the wider meaning of
gifts of nature, such as rivers, oceans, climate, land as a factor of production. According to him,
mountains, fisheries, mines, forests, etc. In the it is more convenient to consider only the land
words of Dr Marshall, by land is which can be bought and sold as a factor of
meant…..materials and forces which nature production, rather than such elements as
gives freely for man’s aid, in land, water, in air, sunshine, climate, etc. which do not enter
light and heat. Land is, thus, an important factor directly into costs. Similarly, it is wrong to group
of production which helps in the production of together the services of an unskilled worker with
goods and services in one way or the other [6]. that of an engineer, or of an engine driver with
Labour refers to all mental and physical work that of a waterman in the railway Again, there is
undertaken for some monetary reward. It little point in grouping together as capital, as
includes the services of a factory worker, a diverse as canals, diesel, seeds and machinery.
doctor, a teacher, a lawyer, an engineer, an It would, therefore, be more accurate to lump
officer, etc. But labour does not include any together all homogeneous units, whether
work done for leisure or which does not carry hectares of land, workers, or capital goods, and
any monetary reward. A person painting for to consider each group as a separate factor of
leisure, singing a song to entertain his friends, production. This method gives us a large
or attending to his garden would not be number of factors of production and each group
considered to have done any labour in the is regarded as a separate factor [6].
sense of economics. On the other hand, if a
person sells his paintings, a singer sings a song Again, the distinction between land, labour and
for a fee and a gardener looks after a garden in capital is not clear. To take land and capital, it is
payment for money, their services are regarded said that land is a gift of nature “whose supply
as labour. Thus labour is essential for cannot be increased while capital is man-made
production [6]. Capital means all man-made whose supply is changeable. This is not correct
resources. It comprises all wealth other than because the supply of land can also be
land which is used for further production of increased by clearing it, draining and irrigating it
wealth. It includes tools, implements, and fertilising it by the efforts of man and
machinery, seeds, raw materials and means of capital. The “supply of land” does not refer to its
transport such as roads, railways, canals, etc. In area alone, but to its productivity [6].
modern usage, capital not only refers to
physical capital but also to human capital which Further, we find that land, labour and capital
is the process of increasing knowledge, the often get intermixed into one another and it is
skills and capacities of all people of the country. difficult to specify the contribution of each
It is this human capital which is regarded more separately. For instance, when land is cleared,
important than physical capital in production canals are dug and fences are erected, the
these days. As pointed out by Professor productivity of land increases. But all these
Galbraith, We now get the larger part of our improvements on land are possible by making
industrial growth not from more capital capital investments and through labour. In such
investment but from investment in men and a situation, it is not possible to specify the
improvements brought about by improved men contribution of land, labour and capital in
[6]. increasing productivity [6]. Similarly, the amount
of money spent on educating and training
Land, labour and capital are respectively workers is included under capital. So, when
natural, human and material means of such workers produce goods by operating
production. No production is possible without machines in a factory, they put in their labour as
bringing together these three factors of well as skills (acquired through capital
production and employing them in right investments on them) by using raw materials
proportions. So there must be somebody to hire which are also the product of labour and
them from their owners by paying rent, wages machines used on land. Thus it is difficult to

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disentangle the contribution of land, labour and and fertilizer input in kilogramme (T4). To
capital in such cases [6]. It is customary not to examine the influence of these factors on TFP,
treat organisation as distinct from labour. This is the linear function of the determinants is
misleading and underestimates the role of the specified as in equation (1).
entrepreneur as a factor of production. As a
matter of fact, labour and entrepreneur are quite  =  +   +
(1)
distinct from each other. An entrepreneur is a
man of special managerial ability who controls, All the hypothesized factors were therefore
organises and manages the entire business of a incorporated into the regression equation. The
firm [6]. The concept of the factor of production data collated on these factors were fitted by the
is of great importance in modern economic ordinary linear simultaneous equation (OLSE)
analysis. It is used in the theory of production in method using diverse econometric specifications,
which the various combinations of factors of namely, the Cobb-Douglas, semi-log, quadratic
production help in producing output when a firm and the exponential functional forms. The model
operates under increasing or decreasing costs that gave the best fit was selected as the best
in the short run, and when the returns to scale equation. The partial productivity estimates are
increase or decrease in the long run. Further we the Marginal Products (MP) given as in Eq. 2 [7].
can also know, how the least cost combination
of factors be obtained by a firm. 
 =
(2)

The theory of cost of production also depends


    =  − ;
upon the combinations of factors employed in
business and the prices that are paid to them.
Where,
From the point of view of the theory of costs of
production, factors of production are divided as
TVP = Total Value of Production
fixed factors and variable factors. Fixed factors
TVC = Total Variable Cost and
are those whose costs do not change with the
TFC = Total Fixed Cost
change in output, such as machinery, tube-well,
etc. Variable factors are those whose quantities Total Factor Productivity = Y/TVC
and costs change with the change in output [6].
Where
Factors of production are also divided into
divisible and indivisible factors. Factors are Y = Quantity of output in Kilogramme
divisible when their inputs can be adjusted to the Or TFP = Y/ΣP= X = 
output. Labour is said to be divisible when the
number of labourers may be reduced in keeping Where
with the output of the firm. Divisible factors lead
to the economies of scale for a firm by adjusting P= = Unit Price of the ith variable and
the number of factors to the output of the firm. X = = Quantity of ith variable input
Indivisible factors are those which are available
in minimum sizes, and are lumpy, such as @ AB BℎDE F = /G,
machines, entrepreneur, et cetera. They also
lead to economies of scale, but at a faster pace. Where,
A firm’s expansion occasions proportionate
increase in its return to scale. This increase is AVC = average variable cost in Naira..
due to the fact that the indivisible factors are
L
employed to their maximum capacity. More ℎDDKD,  = = 1/F.
MN
output can be had by using the existing
machines up to their full productive capacity [6].  = PQDD K BℎD F [7].

Productivity analysis of cassava-based In a similar vein, Factors of production include


production systems gave birth to four factors that Land and other natural resources, Labour,
can be hypothesized as the determinants of Total Factory, Building, Machinery, Tools, Raw
Factor Productivity (TFP) on cassava based Materials and Enterprise [8].
farms [7]. These factors are farm size in hectares
(T1), labour in man-days (T2), educational status Imbalance in the use of factors of production has
of farm household head (T3) in years of schooling been identified as a major reason for the sub-

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optimal coffee yield in Uganda [9]. The desired The factor analysis entails:
elasticity of response indicated that land and
capital were the most limiting factors in cloned i) Preparing a table for Reliability Analysis on
coffee production for poor farmers. Land and variables;
labour were identified as the most limiting factors ii) Preparing a table for mean and Standard
for rich cloned coffee farmers. Overall land and Deviation of measures;
labour were found to be most limiting [9]. iii) Preparing a table for Correlation Matrix
among constructs and preparing a table for
In the year 2003, the Vice-President of Multiple Regression Analysis of
Federation of Malaysian Manufacturers, Raja Organizational Factors with Quality of
Abdul Aziz Raja Musa, stated that Malaysian production [10].
Manufacturing Sector was experiencing a
significant gap between the information system The economics of fish production in Kaduna
and overall resources, therefore causing more State of Nigeria was investigated and the
delays in the overall processes on manufacturing Resources, Costs, Returns and other factors
management [10]. He added that the affecting fish production were examined. The
manufacturing Sector in Malaysia had a problem analysis revealed that Land, water, labour and
in maintaining its competitiveness, quality and capital were the main resources employed in
just-in-time delivery. Some manufacturers fish production. With this high level of
outsourced their production in order to maintain profitability in fish farming, it is recommended
competitiveness. According to the Federation of that this information should be disseminated to
Malaysian Manufacturers in 2003, most people in all the farmers in these and other surrounding
the Malaysia’s Manufacturing Sector were yet to communities [11].
master the Information and Communication
Technology for the purpose of business and The analytical equations used are:
manufacturing as some of these companies were
still working with the conventional manufacturing RP = S −  (3)
[10]
processes. A study to ascertain whether there
was any correlation between Organizational  =  +  = T . U (4)
factors and quality of production in Malaysia’s
Manufacturing companies was done. A S = V . G (5)
theoretical model of the relationships among the
constructs of Organizational factors that consist Where
of Organizational Resources, Rewards and
Recognition Structure, Information System and NFI = Net Farm Income
Quality of production were proposed and tested TC = Total Cost N
using multi- Regression analysis. The results GR = Gross Revenue Gross Return Period
showed positive relationship between PZ = Unit Price of Output
Organizational factors and quality of production Y = Quantity of Output
in Malaysia’s manufacturing industry, except for P[ = Unit Price of Input
one which is related to Rewards and Recognition X = Quantity of Input
Structure. Information System had a dominant
TFC = Total Fixed Cost N and
effect on competitive advantage in either cost or
TVC = Total Variable Cost N [11].
differentiation [10]. Methodology of research
applied:
On the other hand, the inclusion of land-use
activities in Life Cycle Assessment (LCA) has
i) 7-point Likert scale Questionnaire as the
been subject of much debate in the LCA
Research instrument;
community. Despite the recent methodological
ii) Check for multi-co-linearity or correlation
developments in this area, the impacts of land
among items;
occupation and transformation on its long-term
iii) Varimax rotation to reduce number of
ability to produce biomass (referred to here as
variables to smaller numbers;
biotic production potential (BPP)) - an important
iv) Computation of eigenvalues and
endpoint for the area of protection (AOP)
v) Computation of the Kaiser-Meyer-Oklin
Natural Resources – have been largely
value [10].
excluded from LCAs partly due to the lack of life
cycle impact assessment methods. The
characterization factors developed suggest that

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the proposed approach to characterize land use most every computing resources) provide new
impacts on BPP, despite its limitations, is both possibilities for dramatically reducing the time to
possible and robust [12]. learn innovate, and execute on a business plan
[13]. Speed in project and product development
Classical economic theory describes three also enables fast failure, which is actually a
primary factors, or inputs to the production of good thing [13] Toyota offers a great example of
any good or service: land, labour, and capital. using “Time” for competitive advantage, which
These factors facilitate production, but do not absolutely relies on putting more data and
become part of the end product (as a raw information to work [13]. Much research has
material would). While these three factors have chronicled the onslaught of data and its growth,
been much discussed and extended at different especially during the past decade. A recent
points in economic evolution, I believe that they, study by IDC (and sponsored by EMC) predicts
in any of the advanced economies of the world that the amount of digital information created
today, are vastly antiquated. Sometime even annually will grow by a factor of 44 from 2009 to
prior to this new millennium, the primary factors 2020, as all major forms of media – voice, TV,
of production have now assuredly become: radio, print – complete the journey from
Time, Information and Capital. I submit that the analogue to digital. Speaking at a technical
primary relevance of land and labour has industry conference in the summer of 2010,
diminished, not completely but measurably, from Google’s Eric Schmidt warned about both the
their prominence during agrarian and industrial opportunity and the responsibility this much
economic times. In a sense, owning land and information represents. “People aren’t ready for
employing lots of people no longer highly the technology revolution that’s going to happen
correlate to a valuable and successful enterprise to them,” said Schmidt. Indeed, Google and
[13]. countless other companies are thriving at the
epicentre of this data explosion, both enabling
Although in certain industries these two factors and taking advantage of it. In many ways, they
will remain prominent (think mining and energy represent models for any organization to more
production, for example). By and large, land and effectively use information to its own advantage
labour have yielded two more important factors [13]. To this end, harnessing information as a
– time and information. The third factor, capital, primary factor of production will mean
has been and will continue to be of primary recognizing and effectively planning for the four
importance in any Western-style, capitalistic “V’s” of data: volume, velocity, variety and
economy. Or perhaps more to the point, an veracity.
enterprise’s ability to raise and efficiently deploy
capital will continue in its historic prominence 1.1 Volume
[13].
The sheer amount of data being digitized,
Competing based upon speed and time delivers maintained, secured, and then used. Knowing
a primary marketplace advantage. the organization’s current needs and having a
Understanding and translating customer needs plan for its growth is fundamental.
swiftly from concept to practice, in many ways,
determines the success rate of an enterprise. In 1.2 Velocity
part, the pace of technology innovation itself has
set a blistering schedule for the rest of the The speed at which data must be moved, stored,
business world. And in turn, technology transformed, managed, analyzed or reported on
innovation enables all organizations to compete in order to maintain competitiveness. This will
on the basis of time (and speed). vary by organization and application or usage.
Many timelines describe technology
advancements that have accelerated markedly
1.3 Variety
and consistently, quickening even more so
during the past 40 years. Now, the “Internet of
The different types of data, from source (origin)
things,” hastened by cloud computing and
to storage and usage, must be well understood
network ubiquity, unprecedented gains in
because competitiveness requires access to the
microprocessor performance, rapidly declining
right types of data more than ever. From aged
memory prices (while capacities have
flat files to spatial and unstructured data, a plan
skyrocketed), and the more efficient use of
must be in place.
computing power and energy (virtualization of

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1.4 Veracity across all time periods [14]. In order to take into
account the improvement of product quality
The truthfulness or quality of data can either lead caused by information technology investment, a
to poor understanding and decisions that belie hedonic price index is used to deflate the
progress or deliver a powerful jolt of reality that information technology variable. beside the
fuels new insight and ideas. Ultimately, data general specifications of Cobb-Douglas
quality may be the most important frontier [13]. production function, this paper considers the
impact of information technology on total factor
For the first time, causality between data-driven productivity (TFP), capital and labour
decisions making organizational success has productivity, through substitution by applying a
been proven in a study published in 2011 by non-neutral production function. The study
Massachuset Institute of Technology (MIT) and reveals that IT investment provides a significant
University of Pennsylvania researchers in which contribution to productivity. The study also finds
their reporting began thus: that IT capital is a complement for TFP and a
substitute for non-IT capital [15]. Several firm-
“Today, organizational judgment is in the midst level empirical studies have found positive and
of a fundamental change – from a reliance on a excess returns to investments in information
leader’s “gut instinct” to increasingly data-based technology (IT) capital. Using a production
analytics. At the same time, we have been function framework that typically include such
witnessing a data revolution; firms gather inputs as IT capital, non-IT capital and labour,
extremely detailed data and propagate these studies estimate the return on investment
knowledge from their consumers, suppliers, in IT. Taken together, this body of research
alliance partners, and competitors. In particular, provides evidence of a payoff to investment in IT
since 1993, most large companies have invested contrary to the often-cited productivity paradox
in large enterprise resource planning (ERP), [16]. In reporting the results of a survey on the
Supply Chain Management (SCM), Customer experiences of CFOs of the top 800 Australian
Relationship Management (CRM) and similar companies with Enterprise Resource Planning
enterprise information technology [13]. (ERP)-systems and alternative systems
integration concepts, the most important
Success in the new economic battleground is conclusion drawn is that the quality of an
based on our differential use of time and information system is a function of the achieved
information, the two new factors of production. level of integration and not of the integration
Because we can have no more of the former and concept used (for example, ERP) [17]. Also ICTs
an unlimited amount of the latter, our need for enable management to perform new business
efficiency is never-ending. Harnessing functions like computer-aided design, ability to
information in ways that creates new insight and work out of the firm site, co-ordinating team work
ideas will increasingly come from data-driven between distantly located parties et cetera [18].
applications. The analytic views provided by In other hand, information technologies (IT) may
these hard-working applications are fuelled by substitute for routine/manual tasks and
the volume, velocity, variety and veracity of data complement complex problem-solving tasks,
available to an organization – which provides big which can induce bias towards greater demand
incentive to understand and maximize these for skilled labour. This phenomenon of "skilled
dynamic data characteristics. Embracing the biased technical change" has important
new factors of production is now required. implications for the impact of IT on factor
Nothing more than ultimate economic substitution within a firm's production process.
competitiveness is at stake [13]. Using firm level panel data from California
Hospitals from 2002-2006, a translog production
New data on IT investment and productivity for function estimated elasticities of substitutions
41 countries from 1985-2004 were analyzed and between IT spending and skilled versus unskilled
compared the results from 1994-2004 with the labour were specified. It was found that IT is a
years 1985-1993 covered in earlier research by substitute for capital and low-skilled labour, but a
Dewan and Min in 1997, it is found that for complement for high skilled labour [19]. In
developing countries, there was no significant another development, a standard Cobb-Douglas
effect for IT capital for the 1985-1993 sample, but production function was used to model the
the relationship is positive and significant for the production process, considering ICT as a factor
1994-2004 sample. on the other hand, for of production. With this analysis, the impact of
developed countries, IT capital is significant these technologies on company efficiency and

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Okpighe; BJAST, 5(3): 217-232, 2015; Article no.BJAST.2015.021

productivity was assessed. However, moving clerical labour [25]. In another development, the
beyond the productivity paradox, there is growing effect of various treatments, viz, (i) soaking in
evidence that ICT generates large positive plain water and sodium bicarbonate solution, (ii)
returns that are even in excess of the returns cooking of soaked seeds, (iii) autoclaving of
from other types of investments [20]. In reporting soaked seeds, (iv) germination and (v) frying of
the impact of ICT output of scientists in two germinated seeds was studied by measuring the
Nigerian Research Institutes (namely: The oligosaccharide contents of five commonly grown
Nigerian Institute for Oil Palm Research and legumes, namely: Rajmah (Phaseolus vulgaris),
Rubber Research Institute in Edo state of Bengal gram (Cicer arietinum), Black gram
Nigeria), study show that usage of computer, (phaseolus mungo), Red gram (Cajamus cajan)
television, Global System of Mobile Telephones and Broad bean (Vicia faba). The contents of
(GSM), internet and printer ranked highest sucrose, raffinose [26].
among the ICT tools in the Institute which
contributed to productivity [21]. In reporting the For many businesses, the key success factor is
new trends in global manufacturing systems and delivering the right product to market before
the impact of information technology on the competitors and even the development cost is
formation of agile virtual enterprises, the widely secondary to product timeliness [27]. It is to be
spread, efficiently proved information noted also that the project management
technologies such as the internet are currently information involves costs (budget), schedule
being used in their continuous pursuit of new (time) and quality of work, and all are attached to
cutting edge development as well as for winning the same deliverable structure [27].
new markets and sustaining growth [22]. The
research describing mass customization and 2. MATHEMATICAL FORMULATIONS
provision of a framework to understand the AND CASE STUDY
relationships among time-based manufacturing
practices, mass customization and value to the 2.1 Mathematical Formulation
customer is reported. The outcome of the study
indicates that firms with high levels of time-based
From the foregoing, deduced factors of
manufacturing practices have high levels of mass
production are ; Materials (M1), Money (M2),
customization and value to the customer [23]. On
Machines (M3), Manpower (M4), Management
a similar vein, part of a research programme
(M5), Information (I) and Time (T). These factors
being undertaken in Italy on the applicability of
of production will be commonly referred to as 5
the just-in-time (JIT) approach is reported. The
Ms, I and T. Equation (1) above could be
programme includes both the development of
expanded to accommodate the seven factors of
methodological concepts to evaluate JIT
production, that is:
applicability and an extensive survey of the value
of JIT implementation as seen by the Italian
PK \]ABQBE,  = K ^ , _ , ` , a , b , P,  (6)
industry. Two levels of performance are
identified: first, the various performances at
system level (critical manufacturing tasks); c  = d ^e _f `g ah bi P j  k l m (7)
second, operating conditions being the variables
describing the characteristics of single production Where, M1, M2, M3, M4, M5, I and T are the
factors and their interconnections (such as explanatory variables which try to in appropriate
efficiencies, capability, process flexibility and combination define the value for productivity. On
lead times). A paradigm of JIT approach results, the other hand U is the disturbance term and
which explains the changes in the traditional tries to account for the unexplained part of the
trade-off within overall performance [24]. Results productivity. The value of U is dictated by the
of a survey on the application of the just-in-time circumstances of losses due to errors of
(JIT) approach in Italy based on a sample of 173 omission, commission and force majeure. This
industrial companies is reported. Major benefits expression is a non – linear regression equation.
in production system performance are achieved In order to bring the expression into the linear
in terms of mixed flexibility, working capital form, logarithm of both sides is taken to base 10
productivity and productivity both direct and and we get:

log^  = log^ d +  log ^ ^ +  log^ _ + A log ^ ` + \ log ^ a + D log^ b + K log^ P +


 log^  + ℎ log^ l (8)

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Okpighe; BJAST, 5(3): 217-232, 2015; Article no.BJAST.2015.021

If we put

log^  = G; log^ ^ = U^ ; log ^ _ = U_ ; log^ ` = U` ; log^ a = Ua ; log^ b = Ub ; log^ P =


Un ; log^  = Uo ; log ^ l = Up ; log^ d = ᵦ

We get,

G = ᵦ + U^ + U_ + AU` + \Ua + DUb + KUn + Uo + ℎUp . (9)

This is a linear multiple regression equation. Land, manpower, Capital and Entrepreneur, the
productivity P4 is given by:
Let wy be the uncertainty in the result and w1, w2
h i j k
- - - w7 be the uncertainties in the independent P4 = Land Manpower Capital entrepreneur
variables. If the uncertainties in the independent
variables are given with the same odds, then the Substituting the values of Table 2 into this
uncertainty [28] in the results having these odds equation, we get; a = 5 5 } 5~ 5
is given by:
Table 1. Seven factors of production
tV tV tV
qV = √[tT q^ _ + tT q_ _ + ⋯ . . + tT qo _ ] (10)
u v x
Factors Factor status on Likert
scale
3. CASE STUDY
Materials(M1) 5
Money(M2) 5
Consider the missing Malaysian Plane (Flight
Machines(M3) 5
MH370) [29] with brief details in the Appendix.
Manpower(M4) 5
Consider the 4-factor and 7-factor of production
Management(M5) 5
scenarios using 6-point Likert evaluation
Information(I) 0
instrument on the basis of information contained
Time(T) 2
in the Appendix, the tables below are derived. Source: Evaluation of data in appendix using 6-Point
Likert Scale
In the Likert scale, 0 = the resource do not exist;
1 = poor value of resource; 2 = fair value of Table 2. Four factors of production
resource; 3 = good value of resource; 4 = very
good value of resource and 5 = excellent value of Factors Factor status on Likert scale
resource. Land 5
Manpower 5
Recall equation (7) above, that is Capital 5
= d ^e _f `g ah bi P j  k lm . Entrepreneur 5
Source: Evaluation of data at appendix using 6-point
Substituting the values of M1, M2, M3, M4, M5, I Likert Scale
and T that is the 7-factors of Table 1 into this
equation, we get: A critical look at the values of P7 and P4 reveals
that P4 appear greater than P7 giving a false
o = d5e 5f 5g 5h 5i 0j 2 k l m . For a non-zero f, the impression of higher productivity. This value of
value of P7 will be equal to zero. The search for P4 do not represent the reality on ground so
the missing Malaysian plane is a project. Every much as the 4 factor theory failed to embrace the
project executed has a potential to yield results, dynamics of time as constrained by the preset 30
that is, some productive level. In this search, not days designed specification of the bleeping of the
even some pieces of the plane (debris) have Black Box on one hand and the dynamics of the
been found; not a corpse of a passenger or crew information on the location of the missing plane
has been seen. Hence for now the search on the other. Part of the mind set for the search
productivity is equal to zero. This has been for Malaysia MH370 was that the plane crashed
confirmed by the value obtained for P7. into the ocean. Now the body of water in the
ocean is in motion and hence the debris of such
On the other hand for the 4 Factors of a plane could be swept along with the currents.
production, reducing equation 7 to 4 factors of The implication of this scenario is that the
corresponding information in tracking the missing

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Okpighe; BJAST, 5(3): 217-232, 2015; Article no.BJAST.2015.021

plane has to be dynamic and hence become the to the specifications of customers. The world has
most important factor in this instance. The gap or become a global village and producers of goods
shortage of the two factors, namely, Time and and services are facing competitive market
Information as a consequence limited the search scenarios. In the light of this market dynamics,
success for the missing Malaysian MH370 Plane. only producers of goods and services with up-to-
The key to success in locating the missing plane date and accurate market forecasts thrive in the
therefore rest squarely on the acquisition of global market. A celebrated case study to
quality and accurate information. buttress this claim is the Malaysian Plane, Flight
MH 370 that disappeared in flight on the 8 March
4. DISCUSSION 2014. Due to shortage of accurate information
the search and rescue operation for the plane
In defining Factors of Production, several of the has continued up to today without fruitful results.
cited authors defined Land as including So many nations have contributed search and
everything in the universe not created by man, rescue equipment into the search effort to no
and some of the authors actually referred to this avail. The cost of the search for Flight 370 has
conglomerate of items (land inclusive) as passed the $billion Dollar mark. In the military
materials. Consequent on this definition, parlance, a ragtag army in possession of
Materials (M1) could be loosely upheld as a information and time advantage can defeat and
factor of production representing an array of non- create an upset for a formidable and well
man-made items. In a similar vein many of the equipped army. Many organisations today have
authors used Money interchangeably for Capital come to recognize the importance and role of
as factor of production. Hence non- information that the departments of Information
controversially, Money (M2) is also recognized as and Communication Technology (ICT) have been
a factor of production. Some of the authors setup and heavily funded. Many organizations in
equally recognized some of the man-made attempt to track their competitors’ progress even
resources such as Machines and Equipment do industrial espionage. Various countries get
which were hitherto classified as part of capital involved in international espionage in order to
but should now stand on their own as separate regulate and maintain the status quo in world
factor of production. This development is based order. These espionage and information
on the importance and intricacy of machines and gathering apparatus is maintained at a colossal
equipment to productivity. Hence Machines (M3) cost/budget which in a way shapes the overall
represent factor of production. Most of the cited cost of the goods and services/benefits derived
authors in this work recognize Manpower as a from the operations of such organizations. From
factor of production. A couple of authors prefer to the fore going therefore, the impact of
use the word Human Capital in place of information on productivity is too high to be
Manpower in order to erode gender chauvinism. discarded from the list of factors of production. In
In the usage here, manpower is seen as a this light therefore, Information (I) is hereby
collective noun for the total work force consisting prescribed as a factor of production. Time is
of men and women. Hence with due respect to simply defined as duration of consciousness.
the female workforce we uphold the word Time has impact on all the six factors of
Manpower (M4) as factor of production. production so discussed above. Materials usage
Unequivocally, Entrepreneur, Enterprise and and degradation is tied to passage of time.
Management were interchangeably used by Discounting of money and its value is also tied to
various authors as cited in the introduction. It is a time. The depreciation and salvage values of
factual statement that Management is the known machines are tied to time. Manpower evaluation
face of the Entrepreneur or Enterprise. is done on the basis of energy expended per unit
Consequent on this, Management is seen or time. Managements’ programmes are charted
heard of or felt by the environment or society in out on a schedule (which is time driven
statutory, legal, social/community responsibilities. activities). Consequent on the above, time is of
Hence Management (M5) can be substituted for great essence. Project managers realize that
Entrepreneur as a factor of production without time lost cannot be recouped. When project time
loss of meaning and value. In a similar vein, is lost, some of the project activities are left
information has become a very important undone. Hence to recover lost activities, such
component of productivity, manufacturing, project activities must be crashed at a cost. As
maintenance and operations. Many organizations we can see, all the six factors of production are
do market research with the view of time based. Man-hours of an organization are
understanding consumer needs so as to produce derived from the stipulated working hours of the

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Okpighe; BJAST, 5(3): 217-232, 2015; Article no.BJAST.2015.021

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APPENDIX

CASE STUDY ON THE IMPACT OF Lack of coordination between nations assisting


SEVEN FACTORS OF PRODUCTION with the search for missing flight MH370 has
VERSUS FOUR FACTORS ON THE delayed the efforts, as the targeted area was
SEARCH AND RESCUE OF MISSING 1,000 miles away from where the aircraft is
believed to have crashed, sources familiar with
MALAYSIAN PLANE (FLIGHT MH370)
the matter told The Wall Street Journal.
The search for Malaysia Airlines Flight 370, the 19:59 GMT:
longest civil aircraft disappearance in modern
history, has unearthed more questions than Malaysian police say they have excluded the
answers, as the mystery surrounding the fate of possibility that any of the passengers of the flight
the missing jetliner continues to intensify with could have organized a hijacking, Xinhua news
each passing day [16]. agency reported, citing Malaysian media.
Malaysia Airlines Flight MH370: Missing Malaysian investigators excluded three more
Plane Search Timeline Live Updates [16] possibilities, in which the main suspects were
passengers of the plane. The police said they
Published time: March 19, 2014 01:35 were referring to sabotage by passengers with
psychological disorders or personal problems.
Tuesday, April 1 "Suspicions according to four [possibilities] have
been lifted from them (passengers)," said Khalid
01:56 GMT: Abu Bakar, inspector general of Malaysia’s
police, adding that the crew members, including
Malaysian authorities now say the final words both pilots, remain under suspicion in these four
from the cockpit of missing Flight MH370 were, in possibilities.
fact, “Good night Malaysian three seven
zero,” and not “All right, good night,” as was Friday, April 4
reported weeks ago.
11:56 GMT:
"We would like to confirm that the last
conversation in the transcript between the air A US Navy "black box" detector made has been
traffic controller and the cockpit is at 0119 deployed in the search for missing Malaysian
(Malaysian Time) and is "Good night Malaysian Airline’s flight 370. The Australian naval vessel
three seven zero," the Malaysian Department of Ocean Shield arrived with a "towed pinger
Civil Aviation said in a statement released late locator", which is capable of homing in on signals
Monday. from the black box, AFP reports.
Wednesday, April 2 However, Angus Houston, Australia's former
military chief and now coordinator of the eight-
03:01 GMT: nation search, said "we're now getting pretty
close to the time when [the black box signal]
The probe into the missing flight has been might expire."
classified as a criminal investigation, Malaysia's
police chief said, according to The Wall Street Black boxes typically release a ping for 30 days.
Journal. More people are scheduled to be MH370 disappeared March 8, leaving rescue
interviewed. Meanwhile, the investigation into the workers several days at most before its battery
pilot’s flight simulator remains inconclusive. dies.
03:01 GMT: Saturday, April 5
The search area, which has repeatedly shifted as 12:43 GMT:
experts analyze radar and satellite data, is
currently focused on a 98,000-square mile area A black box detector on a Chinese patrol
off Perth, Australia. searching for missing Malaysia Airlines Flight
MH370 has detected a pulse signal in the South

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Okpighe; BJAST, 5(3): 217-232, 2015; Article no.BJAST.2015.021

Indian Ocean, state media reported. It has not Following a preliminary analysis, the agency now
yet been established whether the signal picked believes it is not connected to the jetliner.
up by the Haixun 01 vessel is in fact linked to the
missing jetliner, China's official Xinhua news 23:56 GMT:
agency reported.
Chinese pilots involved in the search operations
Sources in the Malaysian government later found white objects floating in the Indian Ocean,
confirmed that the Chinese vessel had detected about 2,700 kilometres off the coast of Australia,
a signal though there is no confirmation on its Xinhua news agency reported.
origin.
Sunday, April 6
The announcement came as international crews
search the Indian Ocean for the flight's lost black 18:09 GMT:
boxes before the devices stop emitting locator
‘pings’. Black boxes typically release a ping for UK naval ship HMS Echo has arrived in the area
30 days. MH370 disappeared March 8, leaving where the missing Malaysian plane is being
rescue workers several days at most before its searched for. It will conduct underwater searches
battery dies. after preliminary environmental tests. The ship
was dispatched after a Chinese vessel detected
15:35 GMT: a pulse signal in the vast search area on two
occasions. Whether or not they are being emitted
The pulse picked up by a Chinese ship searching from the flight recorders of MH370 is still to be
the southern Indian Ocean for the missing confirmed.
Malaysian airliner does not belong to the black
boxes of Flight MH370, the China Maritime Edited time: April 06, 2014 18:19
Safety Administration says.

The signal picked up by the Chinese vessel's


black box detector had a frequency of 37.5kHz
per second, the official Xinhua news agency said
- identical to the beacon signal emitted by flight
recorders.
_________________________________________________________________________________
© 2015 Okpighe; This is an Open Access article distributed under the terms of the Creative Commons Attribution License
(http://creativecommons.org/licenses/by/4.0), which permits unrestricted use, distribution, and reproduction in any medium,
provided the original work is properly cited.

Peer-review history:
The peer review history for this paper can be accessed here:
http://www.sciencedomain.org/review-history.php?iid=760&id=5&aid=6609

232

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