The Determinants of Organizational Forgetting

Tanguy Brachet, School of Medicine, University of Pennsylvania
Guy David, The Wharton School, University of Pennsylvania

Abstract

Studies of organizational learning and forgetting identify potential channels through which the firm’s production experience is lost. While the ability to distinguish between these channels has implications for efficient resource allocation within the firm, to date, their relative importance has largely been ignored. This paper develops a framework for eliciting the contributions of the two most salient channels, labor turnover and human capital depreciation, to organizational forgetting. We apply our framework to a novel and detailed dataset of ambulance companies and their workforce. We find evidence of organizational forgetting, which results from sizable skill decay and turnover effects, with the latter having twice the magnitude of the former. In addition, we evaluate productivity spillovers in experience as well as the contribution of production inactivity and the scope of tasks to individual‐level skill decay.