Barriers to Imitation and the Incentive to Innovate

95/23/EPS

Posted: 9 Jul 1998

See all articles by Olivier Cadot

Olivier Cadot

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne); Centre for Economic Policy Research (CEPR); World Bank

Steven A. Lippman

University of California, Los Angeles (UCLA) - Policy Area

Date Written: February 1995

Abstract

When innovation is followed by imitator entry, the degree to which the innovator can appropriate the rents induced by its innovations, influences the rate of innovative activity. The author's interest focuses upon the interaction between the rate of innovative activity and the length l of the delay between the innovation and imitation, in a model in which innovative activity generates a sequence of new innovations in the face of market saturation, a competitive motivation (to maintain the monopoly position), and a strategic motivation (to deter entry). The goal of the authors' analysis is to elicit the circumstances in which each force dominates. Because of these countervailing forces, the optimal rate of innovation may not be monotone in the delay l; furthermore, a more easily saturated market can benefit the innovator.

JEL Classification: O31

Suggested Citation

Cadot, Olivier and Lippman, Steven A., Barriers to Imitation and the Incentive to Innovate (February 1995 ). 95/23/EPS, Available at SSRN: https://ssrn.com/abstract=7187

Olivier Cadot (Contact Author)

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland
+41 21 692 3463 (Phone)
+41 21 692 3495 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

Steven A. Lippman

University of California, Los Angeles (UCLA) - Policy Area ( email )

110 Westwood Plaza
Los Angeles, CA 90095
United States

HOME PAGE: http://www.anderson.ucla.edu/acad_unit/policy/

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