Innovation or Imitation in New Ventures?: Contingent Effects of Dysfunctional Competition

Imitation, Innovation, and New Ventures

The economic literature on innovation suggests that imitation can dampen innovation and erode the profits of innovation (Slivko & Theilen, 2014). As a result it is typically argued that new ventures depend on introducing new products ahead of competitors to achieve success (Cai et al., 2014). However, others argue that imitation can improve the market value chain by identifying a superior position and providing improved products to better serve customers that others may not concern, which in turn can reduce the level of R&D investment firms require (Zhou, 2006). Thus, a key decision a firm must make is to be an imitator or an innovator (Slivko & Theilen, 2014). To date, the strategic choice of which strategy, innovation or imitation, generates the best result for firms remains unclear. Scholars have studied this issue from different respective, but they did not reach a consistent conclusion (Zhou, 2006; Naranjo-Valencia et al., 2011; Slivko & Theilen, 2014). This research will, therefore, examine the research question here of whether imitation or innovation generates the best result in what setting.

We argue specifically that there are two main characteristics of environmental change which directs whether a firm chooses imitation or innovation -- technological turbulence and market turbulence (Kohli & Jaworski, 1990; Su et al., 2013; Bodlaj & Čater, 2019). We then also examine the potential for dysfunctional competition to moderate the impact of these two forms of turbulence.

This paper makes two major contributions to the literature. First, we contribute to the entrepreneurship literature by bringing the understanding of imitation/innovation to the domain. Second, previous studies have studied the choice of strategies based on contingency theory, however, they didn’t analyze this issue concerning on environmental turbulence and dysfunctional competition simultaneously in new ventures. In this paper, we construct an integration model to empirically analyze new venture strategies. Third, we explain the inconsistent result between theory and empirical results by analyzing the consumption attitudes of the younger generation in China. The finding can complement the theory of strategy choice based on established companies.