The Influence of Innovation and Imitation on Economic Performance

The importance of innovation and imitation for the economy is discussed in different branches of economic theory. Some study the macro, others the micro level. Macroeconomic theories, concerned with technological progress do not explicitly distinguish between innovation and imitation. Microeconomic case studies, examine the advantage of one strategy over the other for individual firms, but do not study the macroeconomic effects. The present paper attempts to close this gap by proposing a model capturing the innovative and imitative activity on the micro level and the resulting performance on the macro level. This is done on the basis of a multi-agent simulation. The model gives a comprehensive picture of an evolving economy over time, first because it depicts the interplay of innovation and imitation and second because the agents are placed in a changing economic landscape, forcing them to discover new products. Apart from detecting a predominant strategy, the model shows to what extent the strategies depend on each other. A main result is that the significance of innovation is overemphasised in some parts of the literature. Imitation is the more important strategy, but it is actually the right mixture with a large proportion of imitation that is advancing an economy.