Experience, experimentation, and the accumulation of knowledge: the evolution of R&D in the semiconductor industry

This paper examines the interaction and impact on performance of two organizational mechanisms supporting generation and retention of knowledge: experience accumulation and experimentation. It provides evidence that generation of knowledge through experimentation and retention of knowledge through experience were significantly correlated with performance, whereas other measures of R&D commitment and organization, including several suggested by prior studies, were not. It argues that experience and experimentation can function as at least partial substitutes for one another, possessing more of one, firms may need less of the other, and provides evidence that they were so in the semiconductor industry. The evolution of practice at one firm—Intel Corporation—is explored at greater length, providing a qualitative perspective on the process by which a shift towards greater experimentation occurred.