Managing learning resources for consecutive product generations

In this paper, we study how a firm should allocate its learning resources when it is concurrently producing two consecutive generations of one product. We define learning resources as scarce firm-specific resources that a firm allocates towards the improvement of the cost, quality or timeliness of its existing products and processes. We use empirically tested models for demand substitution and learning curves to formulate this problem, and we present our results as propositions with regard to the optimal time at which a firm should direct all its learning resources to the newer product generation, depending on the substitution rate of the two product generations, the learning rate, and the level of cross learning. Results indicate that learning resources should be managed through a firm-wide coordination process that will spread, rather than concentrate, learning resources, not in static but in a dynamic way, to ensure continued high returns from these learning resources.