Firm Strategies for Costly Engineering Learning

The models developed in this paper seek to open up the `black-box' of learning. I suggest that we need to think of learning-by-doing as a process of knowledge creation on the shop-floor by specialized teams of engineers. Learning is to be viewed, therefore, as a conscious decision and not a mere by-product of production. The models in this paper provide the basis for understanding international and inter-firm differences in rates of learning. For example, cheaper engineering resources, longer time horizons, faster output growth rates and superior transferability of knowledge from engineers to production workers are shown to be some possible factors responsible for faster learning in Japanese firms compared to U.S. firms.