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Sincerest Form of Flattery? Product Innovation and Imitation in the European Automobile Industry

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  • Jeff Thurk

Abstract

I study the impact of imitation on the returns to technological innovation when products are differentiated. Using data that capture Volkswagen’s introduction of the TDI diesel engine and the technology’s imitation by rival European firms, I estimate a discrete choice, oligopoly model of horizontally differentiated products. Imitation benefited consumers by increasing product variety and reducing prices but also limited Volkswagen to 14% of potential profits from the TDI. Volkswagen’s ability to differentiate its diesel models made the TDI a worthwhile investment nonetheless. This indicates firms can mitigate imitation risk by bundling easy‐to‐copy technological advancements with difficult‐to‐copy product characteristics including brand.

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  • Jeff Thurk, 2018. "Sincerest Form of Flattery? Product Innovation and Imitation in the European Automobile Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 66(4), pages 816-865, December.
  • Handle: RePEc:bla:jindec:v:66:y:2018:i:4:p:816-865
    DOI: 10.1111/joie.12187
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    Cited by:

    1. Gorkem Bostanci & Pinar Yildirim & Kinshuk Jerath, 2023. "Negative Advertising and Competitive Positioning," Management Science, INFORMS, vol. 69(4), pages 2361-2382, April.
    2. Erdem Dogukan Yilmaz & Ivana Naumovska & Milan Miric, 2023. "Does imitation increase or decrease demand for an original product? Understanding the opposing effects of discovery and substitution," Strategic Management Journal, Wiley Blackwell, vol. 44(3), pages 639-671, March.

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