The Experience Curve Doctrine Reconsidered

Abstract

The author studies the relationship for a typical business unit between an advantaged cost position and the decision to build market share. He first offers a rebuttal of experience curve doctrine, the widely taught argument that causation runs from share building to cost advantage. The rebuttal counterargues that the key to generating a cost advantage is innovation. The author then makes a case that in most market circumstances rate of return building, not share building, is the most profitable way for a unit to exploit an innovation-caused cost advantage.