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DTSTAMP:20241105T002317Z
SUMMARY:Yaqin Sun\, PhD Candidate at Drexel University
DESCRIPTION: \n\nTitle: Can learning-by-doing hurt profit? The case of outs
 ourcing and\ncontract manufacturer encroachment\n\nAbstract: Many original
  equipment manufacturers (OEMs) today reduce\ntheir manufacturing costs by
  outsourcing their manufacturing functions\nto contract manufacturers (CMs
 ). Outsourcing\, however\, carries\nsignificant risks\, such as reduction 
 in manufacturing quality and CM\nencroachment in the OEM’s end market. T
 o reduce these risks\, OEMs\nface critical decisions about which CMs to us
 e\, and how much product\nto outsource. CMs also face subsequent decisions
  about whether to\ndevelop and sell a similar self-branded product. An imp
 ortant\nconsideration in both OEM and CM decision-making is the so-called\
 nlearning-by-doing effect. The learning-by-doing effect refers to the\nlat
 er decrease in unit production cost that arises from increasing\nproductio
 n quantity. As the CM builds more product\, it learns to make\nthe product
  more efficiently\, and thereby lower its future production\ncosts. The CM
 ’s learning rate is the magnitude of the CM’s\nsubsequent decrease in 
 unit production cost per unit increase in\ninitial production quantity. In
  most circumstances\, CM profits are\nenhanced by having a higher learning
  rate. Interestingly\, however\,\nwhen a CM decides to encroach in the sec
 ond period\, there exist\nparticular market conditions wherein a higher le
 arning rate hurts CM\nprofits. We describe these conditions in detail belo
 w. Notably\,\nwhether the wholesale price is exogeneous or endogenous\, an
 d the\nspecific magnitude of the wholesale price relative to market size a
 nd\nproduction costs\, play important roles in the relation between\nlearn
 ing rate and CM profits. Our findings suggest it is prudent for\nCMs to co
 nsider market conditions for their future selfbranded product\nprior to ma
 king investments to enhance their learning rate.\n 
DTSTART:20191115T180000Z
DTEND:20191115T193000Z
LOCATION:Gerri C. LeBow Hall\, 3220 Market Street\, 209\, Philadelphia\, PA
  19104
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