Organizational capital, technology adoption and the productivity slowdown$

There is evidence linking the productivity slowdown of the 1970s and 1980s to changing patterns of technological adoption related to the spread of information technology (IT). Notably, IT appears to require plant-level reorganization for its full implementation. I develop a general equilibrium model in which organizational capital plays a central role in establishment dynamics, and study its transition path after a shock in the form of an incompatibility between new technologies and previously accumulated plant-level expertise. The behavior of the model is consistent with the structure of the slowdown, as well as the subsequent resurgence. Further applications are discussed. r 2006 Elsevier B.V. All rights reserved.