Substitution in R&D across countries

Suppose imitation becomes easier in developing countries due to international technology diffusion or other reasons. If imitation also occurs in the North, Northern imitators (as well as innovators) would become less secure from low-cost Southern imitations. Does the resulting rise in Southern imitation lead to a decrease in Northern imitation (and perhaps even innovation)? If so, does the overall rate of imitation rise or fall? This paper builds a product cycle model with imitation in both the North and the South (along with innovation in the North) to address questions related to the level and composition of imitation across countries. # 2002 Elsevier Science B.V. All rights reserved. JEL classification: F1; F4; O3