Innovate or Imitate? The Role of Collective Beliefs in Competences in Competing Firms

Abstract

This study focuses on the collective beliefs of managers in competing firms and how they interpret and respond to successful technological innovation. Drawing on prior work suggesting that managers will tend to overestimate their own competences and neglect those of their competitors in conditions of ambiguity, this paper explores these issues through a case study of competitive innovation in Formula 1 motorsport. The study concludes with a framework to explain how firms arrive at either innovative or imitative approaches, and why they may shift between them. The framework tentatively suggests that the focus on inimitability emphasized in the resource-based literature is potentially misplaced when taking an interpretive perspective of competitive dynamics. This lens suggests that managerial logic in response to performance feedback favours more innovative approaches placing greater emphasis on non-substitutability as the basis for creating barriers to competitive advantage. However, the study also identifies some of the potential interplay between innovation and imitation, and suggests a more nuanced way of considering incremental innovation by extending the potential opportunities for creating competitive advantage through innovative imitation – where the original innovation is outperformed by creative approaches to imitation and also imitative innovation – where imitative adaptations of an innovation extend the period of competitive advantage beyond that which would normally have been achieved.