Parametric interdependence, learning-by-doing, and industrial structure

Abstract

We explore the proposition that parametric interdependence makes learning-by-doing a nondeterministic, path-dependent process. The implications of our model challenge two conventional beliefs about the relationships between industrial structure, spillovers, and learning-by-doing. First, we challenge the belief that the monopolistic industrial structure always maximizes learning-by-doing gains when there are no spillovers. Second, we challenge the belief that increasing spillovers unambiguously increases welfare when learning-by-doing drives innovation.