Imitation: Does it hinder or help a firm to innovate?

For decades, governments have invested billions of dollars to run strict intellectual property regimes in efforts to deter imitation and thus encourage innovation in research and development. However, this hasn’t stopped firms from imitating; just look at the smartphone and tablet market.

Research by Ahmed Doha, Assistant Professor of Operations Management at the Sprott School of Business, shows that under certain conditions, a firm’s imitation activity can and does increase its innovation output. Taking this into account, could governments save a lot of money and increase innovation by reconsidering its policies that penalize imitation?

Doha thinks they could. In his paper “The Dynamics between Imitation and Innovation within the Firm”, Doha proposed that imitation is a prominent R&D activity, much like innovation, that spans many industries, and the most successful companies do both. Focusing on the high tech and pharmaceutical industries, Doha looked at how firms spend their R&D dollars. Do they spend it on imitation at all? Governments grant R&D funds on the assumption that firms spend them on innovation. However, Doha’s research shows that firms, at least in R&D-intensive industries, are spending R&D money on both imitation and innovation.

“Governments are inadvertently contributing to imitation through funding for R&D, while on the other hand they are condoning imitation through rigorous and costly intellectual property regimes,” says Doha. “What are possible better and cost-effective approaches to deter imitation?”

For the second part of this study, Doha looked at how imitation activity affects innovation output within a firm. Doha proposed that there are tradeoffs and complementarities between imitation and innovation within firms’ R&D activities.  The results were a surprise to the researcher himself.  He found that low to medium levels of imitation activity resulted in increased innovation output, whereas intense levels of imitation activity negatively impacted innovation output. Therefore, imitation is helpful to innovation, but only when practised in moderation.

“So if a firm is engaged in intense imitation activity over a period of time, they are forgoing considerable innovation output and profits,” says Doha. “This knowledge, in and of itself, is a deterrent to imitation, which is what an IP regime is aiming for. Firms and governments could save billions, but only if they know about this research.”

Doha’s research is summarized in his paper entitled, “The Dynamics between Imitation and Innovation within the Firm”, which has been published in the Best Paper Proceedings of the 2012 Academy of Management Annual Meeting in Boston.