What's Experience Got to Do With It? Sources of Cost Reduction in a Large Specialty Chemicals Producer
Conventional learning curves relating unit cost to measures of production experience are estimated for 221 specialty chemicals produced by a Fortune 500 company. Detailed records on cost and R...D coupled with insights from company personnel are used to explain the variation across products in the rate of cost reduction. Products that exhibited the strongest relationship between unit cost and measures of production experience were subject to specific initiatives, particularly process R...D. The R...D was not, however, generally motivated or informed, by production experience. However, cumulative past output, the most commonly used measure of production experience, was related to expected future output, which conditioned the expected future returns from R...D and the choice of R...D projects. Thus, cumulative output was connected to unit costs through its role in conditioning incentives to undertake process R...D rather than as a proxy for production experience. This suggests that the strong relationship commonly found between unit cost and measures of production experience may reflect incentives to reduce cost as much as learning from production experience.
Volume (Year): 46 (2000)
Issue (Month): 1 (January)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eric D. Darr & Linda Argote & Dennis Epple, 1995.
"The Acquisition, Transfer, and Depreciation of Knowledge in Service Organizations: Productivity in Franchises,"
INFORMS, vol. 41(11), pages 1750-1762, November.
- Epple, D. & Argote, L. & Darr, E.D., 1995. "The Acquisition, Transfer and Depreciation of Knowledge in Service Organisations: Productivity in Franchises," GSIA Working Papers 1995-16, Carnegie Mellon University, Tepper School of Business.
- A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring.
- Kenneth J. Arrow, 1962. "The Economic Implications of Learning by Doing," Review of Economic Studies, Oxford University Press, vol. 29(3), pages 155-173.
- Marvin B. Lieberman, 1984. "The Learning Curve and Pricing in the Chemical Processing Industries," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 213-228, Summer.
- Drew Fudenberg & Jean Tirole, 1983. "Learning-by-Doing and Market Performance," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 522-530, Autumn.
- Ronald S. Jarmin, 1994.
"Learning by Doing and Competition in the Early Rayon Industry,"
RAND Journal of Economics,
The RAND Corporation, vol. 25(3), pages 441-454, Autumn.
- Ron Jarmin, 1993. "Learning By Doing And Competition In The Early Rayon Industry," Working Papers 93-4, Center for Economic Studies, U.S. Census Bureau.
- Linda Argote & Sara L. Beckman & Dennis Epple, 1990. "The Persistence and Transfer of Learning in Industrial Settings," Management Science, INFORMS, vol. 36(2), pages 140-154, February.
- von Hippel, Eric & Tyre, Marcie J., 1995. "How learning by doing is done: problem identification in novel process equipment," Research Policy, Elsevier, vol. 24(1), pages 1-12, January.
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:46:y:2000:i:1:p:28-45. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.