Learning-by-Doing

Abstract

Empirical studies of the production process in various industries have demonstrated a positive association between current labour productivity and measures of past activity like past cumulative output or investment (see Wright 1936; Hirsch 1956; Alchian 1963; Hollander 1965; Sheshinski 1967; Boston Consulting Group 1972, 1974, 1978; Lieberman 1984). A hypothesis advanced to explain this is that labour learns through experience and that experience is obtained during the production process. In other words, learning-by-doing is one of the reasons giving rise to dynamic economies of scale, because a firm knows that increasing current production reduces future average costs. If knowledge obtained within one firm cannot be communicated to other firms, we speak of learning without spillovers. There is some empirical evidence, though, that firms cannot totally exclude outsiders from their stock of knowledge, mainly because of labour turnover (see Boston Consulting Group 1978; Lieberman 1984). Learning spillovers are a special case of positive externalities. The study of learning-by-doing, therefore, is a special case in the study of economies characterized by dynamic economies of scale and positive externalities.