[2020-01]

When should the leader promote rather than deter imitation?

Park, Gangmin
Moon Soul Graduate School of Future Strategy, KAIST

Yi, Sangyoon
Moon Soul Graduate School of Future Strategy, KAIST

ABSTRACT

Traditionally, imitation by followers has been perceived as eroding the competitive advantage of the leading firm, and thus it’s important for the leader to make imitation harder and imperfect. Recent research on imitation and related industry cases, however, gives rise to an opposite view: Helping followers to imitate easily may benefit the leader to sustain its leadership. In this study, we examine this theoretical possibility and attempt to figure out when and why such possibility arises. In so doing, we consider modularity in the technology subject to imitation as an important factor that may shape the merit of imitation promotion. To systematically analyze the consequences of imitation promotion, we develop a computational model where a leader reveals some modules for imitation by followers while hiding the other modules for which followers have to engage in innovation. To improve their performance, the followers imitate the revealed modules of the leader while engaging in their own innovation with respect to the hidden modules. Our analysis shows that more imitation promotion by the leader does not necessarily leads to a greater likelihood of followers’ surpassing the leader. Instead, the degree of imitation promotion and the number of the followers that surpassed the leader have an inverted U-shaped relationship. This implies that when substantial parts of the secrete of the leader’s success are available to the followers, it may be better off for the leader to promote imitation for the followers to access more of the hidden parts. Notably, the likelihood of leadership turnover is highest when modularity is moderate. Rather, high modularity is on average good for the leader to secure its leadership from imitation. This implies that when it comes to the likelihood of leadership turnover, rather than the reduction of leader-follower gap, modular design is not bad for the leader because it may help secure the leadership from by followers’ imitation.

Keywords: Imitation, Innovation, Leadership, Modularity