Indeed, when labour is plentiful, there is not much incentive to invest in productivity-boosting technology. And when everyone's sales are weak, there is not much incentive to invest to try to increase them. There is nothing quite like a tight labour market to make firms think about how to do things more efficiently.
The pressures of strong sales or competition might spur innovation, but many other factors enable it. Infrastructure is a key enabler not only of productivity growth of existing firms, but whole new business opportunities. Often we think of communications infrastructure and the internet in this context.