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Strategic Implications of Learning by Doing

  • Aidan Hollis

This paper examines firm strategy when competitors are at different points along the learning curve. It shows that firms high on the learning curve will have strong incentives to exclude new competitors, while firms that are learning more slowly will have weaker incentives to hinder new competitors and may even wish to encourage entry. The same strategies are shown to apply when firm reputation is acquired through participation in an industry. Several examples of strategic behaviour that take advantage of differential learning speeds or heterogeneous reputations are suggested and a variety of applications of the principle involved are explored.

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Article provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.

Volume (Year): 9 (2002)
Issue (Month): 2 ()
Pages: 157-174

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Handle: RePEc:taf:ijecbs:v:9:y:2002:i:2:p:157-174
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  1. Mukesh Eswaran, 1994. "Licensees as Entry Barriers," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 673-88, August.
  2. Gallini, Nancy T, 1984. "Deterrence by Market Sharing: A Strategic Incentive for Licensing," American Economic Review, American Economic Association, vol. 74(5), pages 931-41, December.
  3. Joseph Farrell and Nancy T. Gallini., 1987. "Second-Sourcing as a Commitment: Monopoly Incentives to Attract Competition," Economics Working Papers 8760, University of California at Berkeley.
  4. Economides, Nicholas, 1996. "Network externalities, complementarities, and invitations to enter," European Journal of Political Economy, Elsevier, vol. 12(2), pages 211-233, September.
  5. Seabright, Paul, 1996. "The starfish effect: Can market entry by one firm encourage further entry by others?," European Economic Review, Elsevier, vol. 40(3-5), pages 541-550, April.
  6. Kathleen R. Conner, 1995. "Obtaining Strategic Advantage from Being Imitated: When Can Encouraging "Clones" Pay?," Management Science, INFORMS, vol. 41(2), pages 209-225, February.
  7. Salop, Steven C & Scheffman, David T, 1983. "Raising Rivals' Costs," American Economic Review, American Economic Association, vol. 73(2), pages 267-71, May.
  8. Yi, Sang-Seung, 1999. "Entry, licensing and research joint ventures," International Journal of Industrial Organization, Elsevier, vol. 17(1), pages 1-24, January.
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