In the applied growth theory investment is assumed to foster economic growth. Additional investment leads to capital accumulation without any influence on technological progress. This paper assumes that developing innovative technologies allows firms to lower their costs of production per ruble of output. The link between investment process and the dynamics of production costs is analyzed for key Russian industries. The data used is the official statistics borrowed from the Federal State Statistics Service (GKS) and covers the period from 1^st quarter of 1995 to 4^th quarter of 2004. Error correction models are estimated and short-run fluctuations and long-run equilibrium for costs structure and investment are observed at a disaggregated industry level. Modeling costs structure helps to answer the question whether investment expenditures are, at least partly, aimed at securing technological progress. This, in turn, determines the nature of economic growth, i.e. whether the growth observed is extensive or intensive. If improved technologies do not emerge as a result of investment then it appears that investment process in an industry is organized ineffectively. It seems that effect of investment on production efficiency varies across the industries, and the overall efficiency of investment can be questioned.