An Interdisciplinary Approach to the Management of Organizations

Abstract

The classical production function together with its modern reconstructions relates to an innovation system of input-output analysis. Factors of production are inputs into the function. The process of production is to make goods and services or outputs from the inputs. In economics, the analysis of factors of production generally decomposed into four main categories. These are land, labor, capital and entrepreneur. Conceptual framework of production function is determined by these four factors of production. Each factor of production has its particular characteristic as an input data and plays an important role of function that turns into output data after specific process. Land is a fixed factor of production in quantity albeit it alters in natural quality and it includes all natural resources available at a particular place and time. Labor is a variable factor of production that alters both in quantity as well as quality and it includes all kinds of mental and physical human resources. Labor can also be transformed in quality with the aspect of learning by doing which in essence is a cognitive procedure (Arrow, 1971; Thompson, 2010). Entrepreneurship as a special type of labor corresponds to human capital approach to production function. Capital is also a variable factor of production which comprises material, tangible and intangible resources of society (Eisfeldt & Papanikolaou, 2014). Entrepreneur organizes those three factors of production and makes the best use of them with the optimum level of effort in production process. Remunerations of factors of production are rent for land, wage for labor, rate of interest for capital and profit for entrepreneur.