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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.

Suggested Citation

  • Harabi, Najib, 1991. "Innovation versus Imitation: Empirical Evidence from Swiss Firms," MPRA Paper 26214, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:26214
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    References listed on IDEAS

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    1. Mansfield, Edwin, 1985. "How Rapidly Does New Industrial Technology Leak Out?," Journal of Industrial Economics, Wiley Blackwell, vol. 34(2), pages 217-223, December.
    2. Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, vol. 91(364), pages 907-918, December.
    3. 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.
    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, Specia), pages 783-832.
    5. 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.
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    Cited by:

    1. repec:prg:jnlpep:v:preprint:id:689:p:1-16 is not listed on IDEAS
    2. Sara Barcenilla & Gregorio Gimenez & Carmen López-Pueyo, 2019. "Differences in Total Factor Productivity Growth in the European Union: The role of Human Capital by Income Level," Prague Economic Papers, Prague University of Economics and Business, vol. 2019(1), pages 70-85.
    3. Amiya K. Chakravarty, 2021. "The outsourcing conundrum: Misappropriation of intellectual property in supply chains," Naval Research Logistics (NRL), John Wiley & Sons, vol. 68(2), pages 229-240, March.
    4. Harabi, Najib, 1996. "Patents in Theory and Practice: Empirical Results from Switzerland," MPRA Paper 9606, University Library of Munich, Germany.
    5. Harabi, Najib, 1994. "Technischer Fortschritt in der Schweiz: Empirische Ergebnisse aus industrieökonomischer Sicht [Technischer Fortschritt in der Schweiz:Empirische Ergebnisse aus industrieökonomischer Sicht]," MPRA Paper 6725, University Library of Munich, Germany.
    6. Gregorio Gim�nez, 2011. "Imitations, economic activity and welfare," Documentos de Trabajo dt2011-03, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.

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    More about this item

    Keywords

    Innovation; Innovation costs; Imitation; Imitation costs; Imitation time;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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