<PAGE>   1
                                                                    EXHIBIT 11

                   MECHANICAL DYNAMICS, INC. AND SUBSIDIARIES

                 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>

in thousands, except share and per share data                              1997           1996            1995
--------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE:
<S>                                                                    <C>            <C>            <C>
   Net income......................................................    $         744  $       2,071  $       1,381
   Accretion of value of warrants..................................               --             --            234
                                                                       -------------  -------------  -------------
   Net income available to common shareholders.....................    $         744  $       2,071  $       1,147
                                                                       =============  =============  =============

   Weighted average common shares outstanding......................        5,805,936      4,990,215      3,256,694
   Shares issued below fair market value...........................               --             --         47,250
   Converted preferred shares......................................               --             --        484,758
                                                                       -------------  -------------  -------------
     Pro forma adjusted shares outstanding                                 5,805,936      4,990,215      3,788,702
                                                                       =============  =============  =============
   Pro forma basic net income per common share.....................    $        0.13  $        0.42  $        0.30
                                                                       =============  =============  =============

DILUTED EARNINGS PER SHARE:
   Net income available to common shareholders.....................    $         744  $       2,071  $       1,147
                                                                       =============  =============  =============

   Weighted average common shares outstanding......................        5,805,936      4,990,215      3,256,694
   Shares issued below fair market value...........................               --             --         47,250
   Converted preferred shares......................................               --             --        484,758
   Effect of stock options and warrants............................           61,817         79,813         61,122
                                                                       -------------  -------------  -------------
     Pro forma adjusted shares outstanding                                 5,867,753      5,070,028      3,849,824
                                                                       =============  =============  =============
   Pro forma diluted net income per common share...................    $        0.13  $        0.41  $        0.30
                                                                       =============  =============  =============
</TABLE>