Dynamics of imitation versus innovation in technological leadership change: Latecomers’ catch-up strategies in diverse technological regimes

We examine how latecomers should allocate resources between innovation and imitation to overtake industry leaders across different technological regimes, characterized by appropriability, cumulativeness, and cycle time of technologies (CTT). Using computational models, we find that a one-sided focus on either innovation or imitation impedes technological leadership changes. Also, findings suggest that at early stages with low-level technologies, latecomers should prioritize imitation by allocating more resources to it. However, as they advance, a greater allocation of R&D resources to innovation becomes crucial. Next, we investigate the role of various technological regime variables in the interplay between this innovation-imitation mix. First, our simulations indicate that under a regime of low appropriability and high cumulativeness, allocating more resources to imitation tends to be more effective than focusing on innovation. Second, our simulations reveal an inverted U-shaped relationship between CTT and the probability of latecomers overtaking industry leaders. There exists a certain level of CTT that maximizes the overtaking possibility because a short CTT offers latecomers opportunities from rapid obsolescence of leaders’ technologies but constrains latecomers’ learning from existing technologies. With a short CTT, it is advantageous for latecomers, particularly those starting with a low technology level, to allocate more resources to imitation.