Whether and How Does Learning Curve Uncertainty Affect Early Mover Advantage?

The existence of a learning curve, in which costs decline with cumulative experience, suggests that early entry (and production) provides learning opportunities that create competitive advantage by reducing future production costs relative to later entrants. We argue that this proposition is subject to an under-appreciated limitation -- that progress down the learning curve may be uncertain. If there is uncertainty in the learning curve, then the taken-for-granted wisdom regarding the benefits of learning curves may over- or under-emphasize the value of early entry. We consider two forms of uncertainty -- prospective (future production costs) and contemporaneous (current production costs). We demonstrate computationally that while prospective uncertainty in the learning curve enhances the learning benefits of early entry and production, contemporaneous uncertainty reduces these benefits. Further, we examine the implication of these findings for learning curve spillovers between leader and laggard firms. We conclude with implications for future research regarding learning curves and the pursuit of early mover advantage. [ABSTRACT FROM AUTHOR]