Learning and technical progress in the commuter aircraft industry: an analysis of Embraer's experience

Abstract

Companies in industrializing nations face major hurdles when moving into complex and highly competitive manufacturing industries. This paper examines the example of such an entrant: the Brazilian aircraft company, Enbraer. The paper is concerned with the technological strategy pursued by Embraer, and its learning experience with the Brasilia commuter turboprop, which achieved a 25% world-market share in its seat category, due in no small measure to its cost competitiveness and technological proficiency. The paper presents econometric evidence of substantial learning effects, as captured by the learning curve elasticities of the Brasilia, which conforms to frontier parameters. Although Embraer was successful in its early product offerings aimed at a narrow niche, its subsequent difficulties in moving to a broader product line and sustaining its technological development, illustrate some of the problems that industrializing nations' enterprises may encounter in building on a successful entry in technology-intensive industries at a time of growing competition, without crafting alliances to share the large associated technological and commercial risks.