Louis Mulotte

Do Experience Effects Vary Across Governance Modes? Evidence from New Product Introduction in the Global Aircraft Industry, 1948–2000

We examine the potential for improved performance through experiential learning of three modes of new product introduction: internal development, joint development, and licensing. Drawing on the organizational learning literature, we argue that the speed of experiential learning—that is to say, the marginal performance benefit of experience—is higher when firms carry out activities that allow for a clearer understanding of cause–effect relationships, whereas experiential benefits plateau at higher levels of experience when firms are in activities involving higher levels of related task variation. We thus predict that both the speed of learning and the experience threshold are higher in internal development than they are in licensing; the speed of learning and experience threshold in joint development fall in between. This means that the potential for improved performance through experiential learning should be greatest with internal development, moderate with joint development, and rather limited in licensing. We study the performance of 278 new aircraft introductions undertaken by 94 firms between 1948 and 2000 and find support for our hypotheses.