Imitation to innovation: late movers’ catch-up strategy and technological leadership change

Strategy and Entrepreneurship, Strategy and Entrepreneurship

Columbia Business School Research Paper

2015

Little attention has been devoted to the question of how late movers overcome first-mover advantage and catch up with incumbents. We examine the role in catch-up of late movers’ optimal resource allocation between innovation and imitation. Building on Nelson and Winter’s (1982) technology learning and competition model, we develop computational models of late movers’ R&D allocation strategy and technological leadership change. The results suggest that one-sided dependency upon either imitation or innovation deters technological leadership change by late movers in the long run, since the leading firms are moving targets. Furthermore, when a late mover’s technology level is low, the late mover should focus on imitation and build technological capabilities and absorptive capacity; then, as the technological gap decreases, the late mover should allocate more R&D resources to innovation and attempt technological leapfrogging. This transition from imitation to innovation plays a critical role in catch-up. We also test our models including a range of technological environment variables such as appropriability, cumulativeness, and technological opportunity. Our model shows that our original findings are resilient across a wide range of technological environment variables.

Imitation; Innovation; Technological catch-up; Technological leadership change; Technological environment

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