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The cost of adopting technology in terms of labour training is quite significant and the measurement of this cost at the micro level is important for policy makers. An explicit integration of training and technological adoption into the standard theory of the firm would allow the optimum level of training cost and its determinant to be analysed. In this article, the author develops a model of the firm that incorporates both technology adoption as well as the uncertainty of the reliability of labour performance in the production process. An augmenter of labour efficiency is used to analyse the effect of employee training and the main conclusion is that the investment in training is likely to be a relatively small percentage of the firm’s total wage bill. A framework for future research, when more complete data on training costs and wage bill at the firm level become available, is also included. Show less