Investment in Knowledge: A Generalization of Learning By Experience

James R. Dorroh, Thomas R. Gulledge and Norman Womer
Additional contact information
James R. Dorroh: Department of Mathematics, Louisiana State University, Baton Rouge, Louisiana 70803
Thomas R. Gulledge: The Institute of Public Policy, George Mason University, Fairfax, Virginia 22030

Management Science, 1994, vol. 40, issue 8, 947-958

Abstract: Learning is often perceived as a cost-reducing endogenous by-product of production processes. In many applications this by-product is modeled as a learning curve; that is, a simple function of time or of cumulative production experience. In an earlier paper we presented an alternative explanation where managers decide what resources to devote to knowledge acquisition. In this paper we expand those results to a situation using a more flexible production technology and emphasizing discounted cost. Our model explains resource and output behavior for a firm that is producing specialized units to contractual order. However, the results are quite general and have implications for investment in research, engineering, science and technology, software development, and worker training. We provide examples where the cost-minimizing producer will choose to invest in knowledge creation early in the production program and then have the rate of investment decline over time. Other interesting results are noted by examining the optimal time paths of the control and state variables in a comparative dynamic analysis.

Keywords: learning augmented planning models; dynamic optimization; optimal control theory; knowledge creation (search for similar items in EconPapers)
Date: 1994
References: Add references at CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.40.8.947 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:40:y:1994:i:8:p:947-958

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().