Revisiting the imitation assumption: Why imitation may increase, rather than decrease, performance heterogeneity

• Date: 01 May 2018
• DOI: http://doi.org/10.1002/smj.2751
• Published date: 01 May 2018

RESEARCH ARTICLE

Revisiting the imitation assumption: Why imitation

may increase, rather than decrease, performance

heterogeneity

Hart E. Posen

1

| Dirk Martignoni

2

1

School of Business, University of Wisconsin-

Madison, Madison, Wisconsin

2

Institute of Management, Università della

Svizzera italiana, Lugano, Switzerland

Correspondence

Dirk Martignoni, Institute of Management,

Università della Svizzera italiana, Lugano,

Switzerland.

Email: dirk.martignoni@gmail.com

Research Summary: Imitation is a central construct in

strategy theory because it is assumed to diminish inter-

firm performance heterogeneity within an industry. We

revisit this assumption, which is premised on the logic that

imitated practices act directly to make the imitator more

similar to its target. This logic is incomplete because imi-

tation also acts indirectly—via its effect on an imitator’s

post-imitation experiential learning efforts through which

it refines imitated practices and fills remaining knowledge

gaps. We examine how an imitator’s focus of attention

during this post-imitation experiential learning process

impacts performance heterogeneity. Employing a compu-

tational model, we contrast the heterogeneity resulting

from imitative entry with that from de novo (non-imita-

tive) entry and identify conditions under which imitation

may increase, rather than decrease, inter-firm performance

heterogeneity.

Managerial Summary: Imitation is commonly assumed

to be a low-risk strategy by which firms can narrow the

performance gap to the market leader. This assumption is

predicated on an understanding of imitation that neglects

the impact of imitation on subsequent, post-imitation,

learning. Such learning serves to refine the imitated prac-

tices and fill remaining knowledge gaps. Our theory sug-

gests that imitation is more risky than is typically

assumed. Imitation leads to bifurcated performance out-

comes. An imitator is more likely to: (a) catch up to the

market leader, and (b) perform far worse than it would

have without imitation. Key factors driving the riskiness

of imitation are the observability of the market leader’s

practices and an imitator’s decision regarding its focus of

attention in post-imitation learning.

Received: 4 February 2016 Revised: 7 August 2017 Accepted: 22 September 2017

DOI: 10.1002/smj.2751

1350 Copyright © 2017 John Wiley & Sons, Ltd. wileyonlinelibrary.com/journal/smj Strat Mgmt J. 2018;39:1350–1369.

KEYWORDS

behavioral theory of the firm, focus of attention,

imitation, learning, NK performance landscape model,

performance heterogeneity

1|INTRODUCTION

A fundamental question in strategy relates to the persistence of inter-firm performance heterogeneity

(Nelson, 1991; Rumelt, Schendel, & Teece, 1994). In this respect, imitation is a central theoretical

construct because it is assumed to be a mechanism by which performance heterogeneity within an

industry is diminished (Dierickx & Cool, 1989; Lippman & Rumelt, 1982). We revisit this assump-

tion, highlighting conditions under which imitation may increase, rather than decrease, performance

heterogeneity. In particular, the logic underlying the traditional assumption is that a partial endow-

ment of imitated practices acts directly to make the imitator more similar to its target. This logic is

incomplete because imitation may also act indirectly, conditioning the process of post-imitation

experiential learning needed to refine imitated practices and fill remaining knowledge gaps. We con-

sider these dual pathways in the context of imitative entry. One implication is that imitative entry

may result in greater performance heterogeneity than de novo (non-imitative) entry.

When an entrant imitates an incumbent’s practices, the imitator and target become more similar,

and performance heterogeneity is diminished. We call this direct mechanism the expropriative effect

of imitation. It is not only consistent with popular wisdom that casts imitators as “copycats”pursu-

ing a low risk strategy to narrow the performance gap to the market leader (Shenkar, 2010), it is also

the implicit assumption underlying the neoclassical economics on which the earliest strategy litera-

ture built (e.g., Caves & Porter, 1977). Excess profit in an industry is assumed to be unsustainable

because it attracts imitating entrants (Schmalensee, 1985). In the strategy literature, imitability is

“arguably at the center of the most important empirical assertions of the RBV”(Grahovac & Miller,

2009, p. 1193). The extant literature highlights isolating mechanisms (Rumelt, 1984) by which mar-

ket leaders undermine imitation (e.g., Lippman & Rumelt, 1982; Posen, Lee, & Yi, 2013; Reed &

DeFillippi, 1990). Thus, the literature suggests that imitation will be incomplete; performance het-

erogeneity will likely be diminished by imitation, although it may not be fully eliminated.

While the extant literature and popular wisdom are predicated on the expropriative effect, we

argue that imitation impacts inter-firm heterogeneity via a second pathway. This indirect pathway,

which we call the generative effect of imitation, occurs because a partial endowment of imitated

practices may condition the process and outcome of post-imitation experiential learning.

1

As Nelson

and Winter (1982, p. 124) argued, an “imitator’s basic tactic is to follow the example…wherever

possible…and to fill in the remaining gaps by independent effort.”Thus, imitation seeds the firm

with an endowment of practices that form the starting point from which subsequent learning com-

mences. Given incomplete imitation of the incumbent’s practices, post-imitation learning from own

experience is necessary, both to fill the gaps among the non-observable practices and to refine the

imitated practices such that the imitated and non-imitated practices function effectively together.

While the literature on imitation and knowledge transfer recognizes the importance of these post-

1

In the remainder of this article, we use the term learning to refer to learning from own experience, and the term imitation to refer to

learning from others’experience.

POSEN AND MARTIGNONI 1351