The Acquisition, Transfer, and Depreciation of Knowledge in Service Organizations: Productivity in Franchises

TLDR

The study investigates how service organizations acquire, depreciate, and transfer knowledge gained through learning by doing. Using weekly data over 18 months from 36 franchised pizza stores in Southwestern Pennsylvania owned by 10 franchisees, the authors analyze knowledge dynamics. The analysis shows that experience reduces unit costs, knowledge depreciates quickly, and it transfers only among stores of the same franchisee, highlighting important theoretical and practical implications.

Abstract

The paper examines the acquisition, depreciation and transfer of knowledge acquired through learning by doing in service organizations. The analysis is based on weekly data collected over a one and a half year period from 36 pizza stores located in Southwestern Pennsylvania. The 36 stores, which are franchised from the same corporation, are owned by 10 different franchisees. We find evidence of learning in these service organizations: as the organizations gain experience in production, the unit cost of production declines significantly. Knowledge acquired through learning by doing is found to depreciate rapidly in these organizations. Knowledge acquired through learning by doing is found to depreciate rapidly in these organizations. Knowledge is found to transfer across stores owned by the same franchisee but not across stores owned by different franchisees. Theoretical and practical implications of the work are discussed.