Role of Latecomers’ Imitation in Overtaking Industry Leaders under Schumpeterian Competition

Role of Latecomers’ Imitation in Overtaking Industry Leaders under Schumpeterian Competition [Link to SSRN]

Abstract

Since Schumpeter emphasized the importance of innovation for latecomers to leapfrog and overtake industry leaders, strategy research has viewed innovation as the primary impetus for leadership change. On the other hand, imitation in this literature has been portrayed as a strategy by which a latecomer can narrow the gap with, but not surpass, leaders. Thus far, little research has examined whether imitation can help latecomers with disadvantageous positions catch up with and eventually overtake leaders. By employing a computational model, we find that latecomers who pursue innovation alone are unlikely to overtake leaders, whereas latecomers who mix innovation and imitation are more likely to do so. When the latecomer allocates all its R&D budget to innovative R&D, it is likely to run out of capital quickly and be unable to continue to invest in R&D. A mix of innovation and imitation better maintains a steady cash stream, helping the latecomer continue to invest in R&D and thereby leaving room for leapfrogging opportunities.

Keywords: Schumpeterian competition, imitation, innovation, technological leadership change, difficulty of innovation

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. View all posts by sungyongchang