ECONOMIC ANALYSIS OF PROCESS INNOVATIONS IN THE MANAGEMENT OF OLIVE FARMS

Abstract

Within a business enterprise, process innovations lead to reduced production costs and to increased profit margins. In this study, we shall examine an olive farm that operates in a perfectly competitive market that has introduced a process innovation so as to contain labour costs and therefore production costs. So, the paper aimed at comparing economic competitiveness of an olive farm that introduced mechanical olive pickers (process innovation) for harvest respect to manual harvest. In the case under scrutiny, for the same price, the reduced production cost determined a shift from a situation of being at a loss to one of profit for the business. Economic analysis showed that introduction of mechanical olive pickers can determine a competitive advantage in small and medium-sized olive farms of Mediterranean areas which decide to mechanize the harvest.