Dynamics of Imitation versus Innovation in Technological Leadership Change: Latecomers’ Catch-up Strategies in Diverse Technological Regimes

Abstract:

We examine the role of latecomers’ optimal resource allocation between innovation and imitation in latecomers’ catch-up under diverse technological regimes. Building on Nelson and Winter (1982), we develop computational models of technological leadership change. The results suggest that one-sided dependency upon either imitation or innovation deters technological leadership change. At an early stage with low-level technologies, latecomers should focus on imitation; then, as the technological gap decreases, they should allocate more R&D resource to innovation. We also examine the role of several variables, such as appropriability, cumulativeness, and cycle time of technologies (CTT), as related to technological regimes. The simulation results show that while low appropriability tends to increase the probability of technological leadership change, it makes imitation a more effective strategy compared to innovation; in addition, while a higher level of cumulativeness tends to reduce the probability of leadership change, it makes imitation a more valuable option because innovation becomes more difficult for latecomers. We also find an inverted U-shaped relationship between the CTT and the probability of technological leadership change. When the CTT is short, it makes sense for latecomers to allocate more resources to imitation, especially when their technology level is initially low.

Number of Pages in PDF File: 47

Keywords: latecomers, technological leadership change, imitation, innovation, technological regime, catch-up

JEL Classification: O31, O32

[Link to the paper on SSRN]

Author: sungyongchang

Hi! I am Sungyong Chang, an assistant professor of Strategy and Entrepreneurship at London Business School. My research interests lie in the area of creativity & innovation, and computational social science. You can also find my working papers in my CV, and on my SSRN page and Google Scholar. I graduated from Columbia Business School in May 2018 and earned BA in Business and Economics as a valedictorian from Seoul National University. I like to read science fiction & mystery novels, play board games, room-escape games, and travel.

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