The Effect of Technological Imitation on Corporate Innovation: Evidence from US Patent Data

66 Pages Posted: 9 Jan 2017 Last revised: 8 Aug 2019

See all articles by Hyun Joong Im

Hyun Joong Im

The University of Seoul

Janghoon Shon

UNSW Business School

Date Written: May 14, 2019

Abstract

Technological imitation may play a crucial role in motivating firms to innovate. However, theoretical predictions and empirical findings on the role of imitation have not yet reached a consensus. One major gap in the previous studies is that the empirical tests are based on samples consisting of only one industry over a short period of time. This study uses a novel measure of industry-level technological imitation proxied by quick citations by competitors to examine the relationship between imitation and innovation. Using US patent data for the period 1977-2005, we find that there are inverted U-shaped relationships between the degree of industry-level technological imitation and industry-level innovation activities and between the degree of industry-level technological imitation and the value of firm-level innovation. Our results suggest that positive externalities from the interactions among firms during the innovation process outweigh the negative effects of free-riding concerns on firms' innovation activities and incentives to innovate up to a high degree of technological imitation, while free-riding concerns outweigh the positive externalities when the level of technological imitation is extremely high. The sector-by-sector analyses show that the relationship between technological imitation and the quantity and market value of innovation are not very different across Pavitt sectors. A comparative analysis on the role of imitation between agglomerated and non-agglomerated industries suggests that the positive effect of a moderate level of imitation and the negative effect of an excessive level of imitation are more pronounced for agglomerated industries. The results suggest that creating innovation clusters, such as Silicon Valley in the United States and Shenzhen City in China, and allowing different innovators to cooperate, imitate and compete with each other would be very effective in promoting corporate innovation. However, an excessively high level of technological imitation is more detrimental for firms in innovation clusters because it lowers those firms' incentives to innovate more radically.

Keywords: Corporate Innovation, Technological Imitation, Value of Innovation

JEL Classification: L10, O31, O34, G30

Suggested Citation

Im, Hyun Joong and Shon, Janghoon, The Effect of Technological Imitation on Corporate Innovation: Evidence from US Patent Data (May 14, 2019). Research Policy, Vol. 48 (2019), 103802, Available at SSRN: https://ssrn.com/abstract=2893504 or http://dx.doi.org/10.2139/ssrn.2893504

Hyun Joong Im (Contact Author)

The University of Seoul ( email )

163 Seoulsiripdae-ro
Dongdaemun-gu
Seoul, 02504
Korea, Republic of (South Korea)
+82-2-6490-2268 (Phone)
+82-2-6490-2219 (Fax)

Janghoon Shon

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

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