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Fighting imitation with fast-paced innovation

Author: Cadot, Olivier ; Lippman, S. AINSEAD Area: Economics and Political Science Series: Working Paper ; 97/73/EPS Publisher: Fontainebleau : INSEAD, 1997.Language: EnglishDescription: 15 p.Type of document: INSEAD Working Paper Online Access: Click here Abstract: This paper examines how potential imitator entry alters the optimal pace at which an innovative firm introduces successive generations of an evolving product. When the imitator is committed to be in the market, imitation leads the innovative firm to speed up the introduction of new generations, provided that the imitation delay is sufficiently long. If instead the imitator's entry decision is simultaneous with the innovative firm's RandD-intensity decision, we show that the innovating firm never overinvets in RandD; for some values of the imitation delay, it will acutally choose to reduce its RandD intensity. Finally if the imitator's entry decision is made after observing the inovating firm's RandD intensity, for intermediate values of the imitation delay the innovating firm will overinvest in RandD in order to deter the imitator's entry
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This paper examines how potential imitator entry alters the optimal pace at which an innovative firm introduces successive generations of an evolving product. When the imitator is committed to be in the market, imitation leads the innovative firm to speed up the introduction of new generations, provided that the imitation delay is sufficiently long. If instead the imitator's entry decision is simultaneous with the innovative firm's RandD-intensity decision, we show that the innovating firm never overinvets in RandD; for some values of the imitation delay, it will acutally choose to reduce its RandD intensity. Finally if the imitator's entry decision is made after observing the inovating firm's RandD intensity, for intermediate values of the imitation delay the innovating firm will overinvest in RandD in order to deter the imitator's entry

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