Imitation to Innovation: Technological Catch-up Strategy of Late Movers in Emerging Economies

Abstract

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’ RD 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.