# Organizational Learning Curves: An Overview

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## Abstract

“Learning curves” have been found in many organizations. As organizations produce more of a product, the unit cost of production typically decreases at a decreasing rate. A learning curve for the production of an advanced military jet built in the 1970s and 1980s is shown in Fig. 1.1. The number of direct labor hours required to assemble each jet aircraft is plotted on the vertical axis; the cumulative number of aircraft produced is plotted on the horizontal axis. As can be seen from Fig. 1.1, the number of direct labor hours required to assemble each aircraft decreased significantly as experience was gained in production, and the rate of decrease declined with rising cumulative output. This and related phenomena are referred to as learning curves, progress curves, experience curves, or learning by doing.

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## Notes

1. 1.

The classic learning curve in Eq. (1.1), $$y=a{x}^{b}$$, can be expressed as a production function. The dependent variable in Eq. (1.1) is labor hours per output $$\left(y=h/q\right)$$. Equation (1.1) can be rewritten as $$q={a}^{-1}h{x}^{-b}$$. Thus, the production function implicit in the conventional learning curve has a single input, labor hours (h), and a single measure of organizational experience—cumulative output (x). The conventional formulation also imposes the assumption of proportionality between output and labor hours. Thus, the conventional formulation of the learning curve is a special case of the more general production function approach.

2. 2.

The relationship between the progress ratio and the learning rate from Eq. (1.1) can be derived as follows:

Let y 1  =  unit cost of producing unit x, y 2  =  unit cost of producing unit 2x. Then

$${y}_{1}=a{x}^{b},{y}_{2}=a{\left(2x\right)}^{b},\rm\rm{and}\rm{y}_{2}/{y}_{1}={2}^{b}.$$

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