Imitation as a Stepping Stone to Innovation

By creating a knowledge base that reduces innovation costs, imitation can serve as a stepping stone enabling …rms from lagging countries to undertake innovation. This paper constructs a product cycle model with this feature to determine what forces could cause a lagging country to shift R&D from imitation toward innovation. Increasing resources or subsidizing R&D in the lagging South increases Southern innovation, while increasing resources or subsidizing R&D in the North decreases Southern innovation. E¤ects are compared with the case where no innovation occurs in the South and to the case where able to innovate without needing to …rst imitate. Keywords: Innovation, Imitation, Appropriate technology JEL classi…cation: F1; F4; O3