Innovation and imitation: substitutes or complements?

ABSTRACT

Most of the research on imitation and innovation has focused on developed countries and examined whether imitation promotes or hinders innovation at the macro, industry and intra firm level, and the effect that this has on economic growth. Less research has been conducted about the dynamics that exist between innovation and imitation at the plant-level in developing countries, and the effect that trade policy has on this relationship. This article uses plant-level data from Mexico to analyse the dynamic relationship that exists between innovation and imitation at the microeconomic level. The empirical results suggest that in the context of a developing country, innovation and imitation complement each other and trade policy has no effect on this relationship.

KEYWORDS:

• Innovation
• imitation
• trade policy
• Mexico

JEL CLASSIFICATION:

• O2
• O3
• O5

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ How this index was calculated is described in Section II.

² For more on this, please see Tybout and Westbrook (1995).

³ For ease of exposition, the per employees is left out. This means that it is taken as given that whenever it’s written royalty payments, non-wage benefits, etc. it means royalty payments per employee, non-wage benefits per employee, etc.

⁴ http://www.wipo.int/export/sites/www/sme/en/documents/pdf/technology_licensing.pdf. While I believe that this assumption is valid, as Deolaliker and Evenson (1989) show, it is not needed to be able to interpret my results.

⁵ Please refer to Deolaliker and Evenson (1989) for a detailed explanation as to how I can assume this, even though I use actual prices.