Sincere flattery – the dynamics of imitation between innovative firms and their competitors

For a company wishing to distinguish itself from the competition, product innovation is an important strategy to consider.  However, companies are forever monitoring their competitors’ developments and therefore any new product innovation can be imitated, eroding the advantage of any differentiation gained.

Understanding the dynamics of imitation therefore is important to any innovative organisation, to better understand how it can shield itself from imitation. Of course, it is also hugely important from the view of the imitator, as they need to know what and when to imitate. For the benefit of both perspectives this paper aims to shed light on product imitation dynamics.

Its own innovation is to provide insight into imitation dynamics over the market evolution, where existing studies have tended to focus only within a given phase of an industry’s evolutionary cycle, such as a new product category launch. It introduces product diffusion as a construct that can not only help capture time-related dynamics but also which allows for a combination of the different prevailing imitation theories into an integrative framework.

The paper sets out several hypotheses to test:

• Over the product diffusion cycle, product technologies launched by market leaders are copied more quickly than ones launched by non-market leader firms;
• Product technologies launched by members of a focal firm’s own strategic group are copied more quickly than ones launched by outsiders;
• Substitute technologies (those that replace existing technologies, performing a familiar function but by different means) are copied more quickly than functionality-defining technologies (those that perform a completely new function).

The UK mobile phone industry from 1997 to 2008 is the reference setting for the analysis. The innovation and imitation strategies of thirteen mobile phone manufacturers during this period are analysed. Data on twenty-two product technologies incorporated by these manufacturers into their models was collected.

The study shows that technologies developed by market leaders and by firms’ strategic group members are imitated sooner than those launched by non-leaders and non-strategic group members. It finds that as product diffusion increases, the gap between the time to imitation of technologies developed by the market leader and the time to imitation of other players’ technologies quickly diminishes. However, the time to imitation of product technologies introduced by a competitor that belongs to the firm’s strategic group and those introduced by other industry players does not tend to diverge.

Regarding which technologies are copied more quickly, findings suggest that functionality-defining technologies are copied more quickly than substitute technologies over the whole product diffusion cycle. The reason for this may be the high cost of reconfiguring production parts and processes and also of the need for extra staff training when companies decide to adopt new substitute technologies.

Finally, the study complements previous findings that firms increasingly rely on the imitation of rivals’ product innovation as a product diffuses in the market, even when it is widely diffused among consumers.

This research suggests that companies might use the level of product diffusion in a market to develop scenarios that help them project how competitors will respond to new product innovations. This could prove a useful tool in developing better understanding of how to protect new innovation from imitation. Yet it may also be instructive in deciding when to imitate for the sake of retaining competitive parity.

The accepted version of the paper is available to download at City Research Online.