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Innovation versus Imitation: Empirical Evidence from Swiss Firms

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  • Harabi, Najib

Abstract

The underlying theoretical assumption of this paper is that if firms can imitate an innovation at a cost that is substantially below the cost of the innovator to carry out the innovation, there may be little or no incentive to carry out the innovation. Cost and time required for imitating new products and processes have an important effect on the incentives for innovation in a market economy. The purpose of this paper is to investigate empirically, first the number of firms capable of duplicating several categories of innovations, secondly the typical level of cost, thirdly the typical amount of time it would take to duplicate innovations if they were developed by a competitor, and finally the relationship between those factors and patents. The findings are based on a survey I conducted among 358 firms in 127 (SIC-four-digit classification) industries in Switzerland in 1988. The results can be summarized as follows: - The median estimated number of firms capable of duplicating a major process and product innovation is three per relevant market (mostly the international market, since the Swiss economy is very open). The corresponding figures for typical process innovations is five and for typical product innovations is six. In other words, there is a surprisingly small number of serious rivals for each firm and furthermore, there are almost twice as many firms capable of duplicating typical innovations as those capable of duplicating major innovations. - The median estimated ratio of imitation cost to innovation cost is about 80% for major patented, 50% for major unpatented, 70% for typical patented, and 40% for typical unpatented innovations. Thus, it is less expensive for a firm to duplicate any category of innovation developed by a competitor than to carry it out itself. - The estimated median of the time length required for duplicating major patented (process and product) innovations is about two years, for typical, patented innovations is about 18 months, for major unpatented innovations is about 16 months, and for typical unpatented innovations, is about ten months. Since there is a significant correlation between cost and time of imitation, the conclusions are the same as under point 2). - Patents tend, on average, to increase the cost and time required for duplicating an innovation.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26214.

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Date of creation: Jan 1991
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Handle: RePEc:pra:mprapa:26214

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Keywords: Innovation; Innovation costs; Imitation; Imitation costs; Imitation time;

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References

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  1. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
  2. Harabi, Najib, 1991. "Einflussfaktoren von Forschung und Entwicklung in der Schweizer Industrie: Ergebnisse einer schriftlichen Expertenbefragung
    [Determinants of Research and Development in the Swiss Industry: Results
    ," MPRA Paper 26213, University Library of Munich, Germany.
  3. Mansfield, Edwin, 1985. "How Rapidly Does New Industrial Technology Leak Out?," Journal of Industrial Economics, Wiley Blackwell, vol. 34(2), pages 217-23, December.
  4. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1987. "Appropriating the Returns from Industrial Research and Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 783-832.
  5. Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 91(364), pages 907-18, December.
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Cited by:
  1. Harabi, Najib, 1996. "Patents in Theory and Practice: Empirical Results from Switzerland," MPRA Paper 9606, University Library of Munich, Germany.
  2. Gregorio Giménez, 2011. "Imitations, economic activity and welfare," Documentos de Trabajo dt2011-03, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.

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