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.

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

JEL Classification: O31, O32