INVENTION AND BOUNDED LEARNING BY DOING

This paper attempts to integrate traditional models of invention and learning by doing, developing a model that emphasizes the interdependence between research activity in the laboratory and production experience on the factory floor. Learning depends on invention in that learning by doing is viewed as the exploration of the finite and bounded productive potential of invented technologies. At the same time, the profitability of costly invention is dependent on learning in that costs of production depend on cumulative learning experience. The model is a true hybrid, allowing for circumstances in which either the incentives to engage in research and/or the incentives to produce different goods are the binding constraints on growth.