This paper aims to address issues of importance of investments on the quality of products and services in the contemporary economy. The investments have an innovative character due the fact that creates material conditions in order to promote the technology, ensuring the development and improvement of production factors. All these glide, then, for excellence, to the goal to achieve maximum quality in some efficient conditions and settled deadlines. Also, it is presented the production function Cobb-Douglas, as a model of economic growth. Thus Cobb-Douglas function is a mathematical model/pattern expressing the relationship between the results obtained and the main economic factors of production. We exemplified this mathematical model, achieving a case study of Star Glass SA.investments, quality, competitive, efficiency

TODORUT Amalia Venera

VASILESCU Ion

English

Research Papers in Economics

  The Ninth International Conference 
“Investments and Economic Recovery”, May 22 – 23, 2009 
 
 
Vol.12, Nr. 2 special/2009        Economia seria Management 
 
26 
 
Investments and their effects on quality 
of product and services 
 
Investiţiile şi efectele acestora asupra calităţii 
produselor şi serviciilor 
 
 
Associate professor Amalia Venera TODORUŢ, Ph.D 
University “Constantin Brâncuşi” Târgu-Jiu, Romania 
e-mail: amalia_venera@yahoo.com 
Professor Ion VASILESCU, Ph.D. 
The Bucharest Academy of Economic Studies, Romania 
e-mail: ion_vasilescu@yahoo.com 
 
 
Abstract 
This paper aims to address issues of importance of investments on the quality of 
products and services in the contemporary economy. The investments have an innovative 
character due the fact that creates material conditions in order to promote the technology, 
ensuring the development and improvement of production factors. All these glide, then, for 
excellence, to the goal to achieve maximum quality in some efficient conditions and settled 
deadlines.  Also,  it  is  presented  the  production  function  Cobb-Douglas,  as  a  model  of 
economic growth. Thus Cobb-Douglas function is a mathematical model/pattern expressing 
the relationship between the results obtained and the main economic factors of production. 
We exemplified this mathematical model, achieving a case study of Star Glass SA. 
 
Keywords: investments, quality, competitive, efficiency 
 
    Rezumat 
Această lucrare îşi propune să abordeze aspecte legate de importanţa investiţiilor 
asupra  calităţii  produselor  şi  serviciilor  în  economia  contemporană.  Investiţiile  au 
caracter novator deoarece creează condiţiile materiale pentru promovarea tehnologiilor de 
vârf,  asigurând  dezvoltarea  şi  perfecţionarea  factorilor  de  producţie.  Ori  toate  aceste 
glisează, apoi, spre excelenţă, spre atingerea calităţii maxime în condiţii de eficienţă şi la 
termenele stabilite. Am prezentat de asemenea pe parcursul lucrării funcţia de producţie 
Cobb- Douglas, ca model de creştere economică. Astfel, funcţia Cobb- Douglas reprezintă 
un  model  matematic  care  exprimă  legătura  dintre  rezultatele  economice  obţinute  şi 
principalii  factori  de  producţie.  Am  exemplificat  acest  model  matematic,  realizând  un 
studiu de caz la SC Star Glass SA. 
 
Cuvinte-cheie: investiţii, calitate, competitivitate, eficienţă 
JEL Classification: A10, M10, M11, M20, M21 
Conceptual guidelines on investment process The Ninth International Conference  
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Economia seria Management    Vol.12, Nr. 2 special/2009 
 
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o be competitive in quality means that all factors in the path of experience 
from market research and continuing with the performance of machinery, 
with  quality  materials,  with  highly  qualified  personnel  to  be  based  on 
investment effort. 
The investment represents a stimulus, a generating (Românu et.al 1997) element 
which makes any activity to born, to grow and to develop.  
Investments  represent  the  material  support  of  economic  development;  they 
underlie supplement, diversification or increased quality of all factors of production. Can 
not ensure increased circulating or fixed capital, to increase the number of jobs, diversify 
production,  increase  product  performance,  increase  labor  productivity,  higher  quality 
products and services without a consumer of financial resources, without investment. 
The  investment  represents  an  expenditure  made  today  to  ensure  a  timely 
development for a future that contains many elements of uncertainty: reducing demand for 
finished products, price increases in raw materials, the emergence of new products, new 
competitors. 
On the basis of any investment activities, should be the principle of economic 
efficiency, the taking of the higher effect per unit of effort made. But every investor knows 
that you can not get quality products and services, with a maximum economic efficiency, 
only by spending, purchasing only high quality machines, raw materials and materials in 
the structure and quality required, and using highly qualified employees. 
The market priorities, the demand on production needs  “continuous changes”( 
Vasilescu,  2004)  investments,  due  to  the  mobility  of  market,  increasing  complexity  of 
economic and social environment, interdisciplinary nature of problems - business, finance 
projects, joint research activities and production. 
Investment as a stimulus in any economic activity can be focus and expressed by 
the following features: duration, risk and efficiency. 
Thus the characteristic time - period, shows that any investment project has a life 
of its own stage and characterized by well defined and moments during which the project's 
economic parameters have described own evolution in the pattern of cash flow. 
The notion of efficiency expressed the ideea that the developer agrees to change a 
current availability of resources for a range of effects, future revenue, which in total amount 
to be higher to initial costs. 
The characteristic of risk results from actual future periods staggering of expected 
effects. These effects are future expectations and not certainties. 
Also,  to  the  concept  of  investment  we  can  assign  a  three-dimensional  image: 
economic, financial and  book-keeping (Vasilescu, 2004). 
The economic size coverage broadens the investment, because according to this 
sense, the investment represents the consumption of all resources that are now hoping to 
achieve in the future of economic effects, staggered in time and which, in total, are higher 
to initial costs of resources. 
The investment size considers investments all financial expenditure of resources 
that  generate  income  and  /  or  savings  for  a  long  time  in  the  future  and  accordingly, 
amortization (repayment) shall be made over many years. 
The  book-keeping  size  is  restrict  and  reduce  investment  in  the  concept  of 
mobilization  in  the  accounting  sense  of  the  word  and  expresses  all  movable  and 
T   The Ninth International Conference 
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Vol.12, Nr. 2 special/2009        Economia seria Management 
 
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immovable, tangible or intangible, acquired or created in the enterprise, designed to remain 
constant in the same form. 
Regardless of the size and interpretation of the concept, the investment represents 
the path to development.  
Interestingly is the nature of investments that gives us clues about the directions of 
development  at  the  firm  or  company.  Such  investments  may  be  "real"  -  tangible  or 
intangible and” financial”. 
The real investments themselves are new physical things such as lands, buildings, 
equipment or knowledge for the firm and are used to produce goods or services. These 
investments are ultimately responsible for the economy's productive capacity. 
The  "real"  investments  may  also  be  investments  on  assets  and  intangible 
investments. Asset investments consist of the firm's physical assets and circulating assets. 
Intangible assets include investments in the form of intangible assets such as goodwill, 
patents, etc. expenditure on training of operating personnel, advertising, educational. 
The financial investments are those in which investors allocate their resources for 
some form of financial instruments such as shares or bonds that represent claims on the 
merits on all real property. 
When  the  real  investment  of  companies  generating  incomes,  this  income  is 
allocated to investors in accordance with both its own business, the number of shares they 
have. 
Particularly suggestive are the areas that are absolutely necessary for sustained 
investment. Of these, the investments in new technology seem to be a determining factor in 
ensuring  success  in  relation  to  competitors.  Thus  investments  in  new  technologies, 
performance, could ensure the creation of a market dominance by undertaking support of 
quality products and services reflected in the characteristics of technical, economic, utility 
quality, etc. 
Hence, the investments are the material support of economic development and the 
way  to  enhance  the  fixed  capital,  increased  technical  and  economic  efficiency  of  the 
existing and creating new jobs. 
Investments have an innovative character due the fact that creating materials to 
promote the  high technology, ensuring the development  and improvement of factors of 
production.  All  these  issues  glide,  then,  for  excellence, in  order   to  achieve maximum 
quality in an efficient conditions and settled deadlines. 
 
Investments in economic incresing/growing patterns – 
production function – Cobb – Douglas 
 
The pattern of growth is a mean of investigation and knowledge of the influence 
the  have  investments  have,  as  the  main  factor  of  economic  growth,  on  the  economic 
phenomena and processes. 
The process of increasing the quality of products and services and the growth is 
influenced by several factors, most important of which are: the capital in service, labor, raw 
materials consumed, technical progress.  
The  production  function  is  a  mathematical  way  of  describing  the  relationship 
between inputs - the factors of production such as labor, equipment, investments, etc. and 
outputs represented by the results in the production process.  The Ninth International Conference  
“Investments and Economic Recovery”, May 22 – 23, 2009 
 
 
 
 
Economia seria Management    Vol.12, Nr. 2 special/2009 
 
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The general formula for such a function is given by: 
) x , , x , f(x   y  n 2 1 … =  
The  broad  functions  of  production  reveals  that  production  is  the  result  of  a 
combination in various proportions of the factors of production. 
Among the factors in the production process, a crucial role it has working capital 
and operational capital. 
Starting to  these  elements,  Cobb  şi  Douglas  (Românu  et.al.  1993)  presented a 
mathematical model to express the link between economic benefits and outcome of the 
main factors of production. 
This production function could be expressed thus:  
µ λ K L g Q ⋅ ⋅ =  
consisting  of:  Q  =  production,  expressed  in  value  form;  L  =  used  work  (number  of 
employees); K = operational capital (volume of fixed capital); λ = coefficient of elasticity 
of production, related to used labor; µ = coefficient of elasticity of production, versus the 
operating function capital; g = factor of proportionality. 
From the relationship shown that production is influenced by two factors (labor 
and  capital)  view  on  the  quantitative  point  of  view,  expressed  by  L  and  K,  but  also 
qualitatively, by other factors, unmeasured according to µ and λ elasticity coefficients  the 
production, play through the coefficient g, which expresses precisely the influence of other 
factors than those taken into account to ensure the agreement of the statistical production, 
with those calculated by the production set. 
Between the elasticity coefficients λ and µ  could be settled the folowing relations: 
1 < µ λ +   →    case the function has an underunit yeld / return, which expresses 
the  development  of  extensive  character,  ie  increasing  the 
production is largely due to quantitative factors. 
1 = + µ λ   →  case  the  function  has  an  unit  yeld  /  return  and  express  a 
development of neutral type. It is an omotetic function.   
1 > µ λ +  →    case  the  function  has  an  supraunit  yeld  / return  and  express  a 
development of intensive type. 
Subsequently  the  model  was  improved,  considering  the  dynamic  nature  of  the 
function, such been made the following forms of the function: 
( ) ( ) [ ] ( ) [ ]µ λ = t K t L g t Q  
( )
t e K L g t Q
Ψ ⋅ ⋅ ⋅ =
µ λ  
( ) ( )
µ λ ε K L g t Q
t ⋅ ⋅ + = 1  
consisting of: t = time; ε = yearly growth of economic efficiency; ψ = elasticity coefficient 
of tehnical progress.   
The first model assumes knowledge of the evolution over time of capital in service 
and number of employees.  
Based on the trend functions established and the coefficient of adjustment g can be 
calculated for each year t the production value Q. 
Using production function Cobb-Douglas implies to run through several stages   The Ninth International Conference 
“Investments and Economic Recovery”, May 22 – 23, 2009 
 
 
Vol.12, Nr. 2 special/2009        Economia seria Management 
 
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1. Collection of data from book-keeping company record, on the development for 
a period (n) of about 8 years of production, capital operation and the number of employees 
2.Calculate of the coefficients  g, λ and µ on the basis of equation system: 
 
∑ ∑ ∑ = + + Q K L g n lg lg lg lg µ λ  
∑ ∑ ∑ ∑ ⋅ = ⋅ µ + λ + Q lg L lg K lg L lg L lg L lg g lg 2  
∑ ∑ ∑ ⋅ ∑ = µ + ⋅ λ + K lg Q lg K lg K lg L lg K lg g lg 2 ; 
 
Development  of  production function  that approximates  the correlation  between 
production value, as dependent variable and the two factors of production considered as 
independent variables; 
Are determined the average annual rate of growth in the future of indicators such 
as productivity, production, etc. and on the basis of production to be achieved and the needs 
of employees for this production; 
Replacing  the  known  values  into  the  production  function  and  establish  the 
necessary of operating capital for the respective production achievement 
Calculation of investment funds to be made to ensure equity in service on the basis 
of the formula: 
C CF CF I o n t + − = , 
consisting of: It = investment to achieve; CFn = fixed capital need for the  h1  year of 
reference; CFo = capital fixed capital of basis year; C =  fixed capital cassation made in the 
period between basis year and  h year. 
Interpretation of results obtained. With the production function may be done the 
evaluating  of  effectiveness  of  production  factors  considered,  also  the  determination  of 
substitution possibilities between factors of production. 
Function Cobb-Douglas, however, does not reflect the degree of qualification of 
personnel and technological quality of fixed capital. In addition, in terms of mathematical, 
functions personal L (t) and K (t) appear to be independent. In reality we can not hire a 
large number of staff that we have not sufficient coverage of fixed capital. Therefore, as a 
complement, appear the condition of Solow, which says that the size of the number of 
personnel reported to the staff as such, must be equal to the size of fixed capital in relation 
to existing capital 
We assume that the production function has two components overlap: Q = QL+QK, 
where QL is the component that is done by people work and QK is made through fixed 
capital contribution. In addition, QL is proportional to the number of employees and labor 
quality, and QK is proportional to the size of fixed capital and technological quality of it. 
Starting  from  these  elements  we  have  the  following  formula  for  generalizing 
classical Cobb-Douglas: 
( ) δ γ β α ω + τ = K L h Q  
consisting  of  :Q  =  production  function  of  the  firm;L  =  employees  number;K  =  fixed 
capital;τ = net productivity of the work (personnel qualification);ω =flat/net investments 
productivity (new technology);α,β,γ,δ = elasticity coefficients ;h = proportionality factor.  The Ninth International Conference  
“Investments and Economic Recovery”, May 22 – 23, 2009 
 
 
 
 
Economia seria Management    Vol.12, Nr. 2 special/2009 
 
31 
Next we introduce the function of Cobb-Douglas production pattern to company 
Star Glass SA representing a case study accordingly to the data in the following table: 
 
The function of Cobb-Douglas production pattern 
Tabel 1 
  Q  lg Q  L  lg L  lg
2 L  K  lg K  lg
2 K  lg L 
lg Q 
lg K 
lg Q 
lg L 
lg K 
1. 149587  5,17489 949  2,97726  8,86407 23870  4,37785  19,16557  15,40699  22,65489  13,03399 
2. 199600  5,30016 938  2,97220  8,83397 31200  4,49415  20,19738  15,75313  23,819714  13,35751 
3. 259000  5,41329 925  2,96614  8,79798 31700  4,50105  20,25945  16,05657  24,36548  13,35074 
4. 329000  5,51719 911  2,95951  8,75869 33200  4,52113  20,44061  16,32817  24,943933  13,38032 
5. 359000  5,55509 904  2,95616  8,73888 35000  5,54406  20,64848  16,42173  25,242662  13,43296 
6. 396000  5,59769 890  2,94939  8,69890 35700  4,55266  20,72671  16,50977  25,484379  13,42757 
7. 442000  5,64542 875  2,94200  8,65536 38000  4,57078  20,97438  16,60882  25,85478  13,47371 
8. 493000  5,69284 830  2,91907  8,52096 41000  4,61278  21,27773  16,61779  26,25981  13,46502 
    43,89657    23,64173  69,86081    36,18346  163,69031  129,69031  198,625648  106,92182 
 
µ λ K L g Q ⋅ ⋅ =   Q = 0,000000083 
K L g Q lg lg lg lg µ λ + + =  
It obtained: g = 1,011, λ = 0,79, n = 0,31 and in production function which supply 
the production evolution related to operating capital and number of employees is:  
Q = 1,11 L
0,79 K
0,31 
The results obtained lead us to conclude that during the analysis period the fixed 
capital contributed at a rate of 27,92% to the production and work at a rate of 72.08%. 
This shows that the emphasis was on growth of working factor against capital, 
which did not allow the promotion of technological processes in machines bearing technical 
progress. 
 
 
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Ioniţă, I.(2008) – The quality management and the value engineering - ASE Publishing 
House, Bucharest 
Paraschivescu, O.A (2007).- The quality management, Tehnopress Publishing House, Iaşi 
Rusu, M. (2000) - Straight foreign investments, Paideia Publishing House, Bucharest 
Vasilescu, I. (2004) – The projects management, Eficon Press Publishing House, Bucharest  
Vasilescu, I., Românu, I., and Cicea, C. (2000). Investiţii. Bucureşti, Editura Economică 
Verboncu, Ion (2006) - Do we know how to lead?, Economic Publishing House , Bucharest 
 

The quality management and the value engineering - ASE Publishing House, Bucharest Paraschivescu, O.A (2007).- The quality management, Tehnopress Publishing House,

Investments and their effects on quality of product and services

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