There are three principal competitive implications stemming from the discussion in this chapter. The first is the importance of recognizing the multilevel nature of imitation decision making. While understanding the causal influence of product and organizational-level signals as independent predictors of imitation, it should also be recognized that these signals are inextricably linked and must thus be accounted for jointly to craft a more complete imitation strategy. For example, we suggest that as a general heuristic, imitating highly innovative products should be avoided since such innovations are likely to reflect a significant difference between what a competitor signals as their understanding of current market conditions and that of the prospective imitator. The innovator firm has not provided any enhancement to the quality of the product-level signal that would compel prospective imitators to jettison their own market knowledge and imitate the radical innovation. Yet, if we look at this signal in the context of a firm with strong market competency, and that innovation is based on that competency, the positive organizational-level imitation signal effectively trumps the negative product-level signal. Although this admittedly increases the complexity of imitation decision making, understanding its multilevel nature should assist in crafting more fine-grained imitation responses.
The second implication is that radical innovation can serve as a competitive differentiator. At its most basic level, imitating radical innovations is discouraged; thus firms pursuing radical innovation may enjoy a temporary differentiation advantage.41 Such an advantage is also the case when firms with a track record of introducing successful innovations pursue radical innovation. However, for firms with a high level of market competency, the imitation of their innovations is highly likely and arguably should be encouraged, regardless of whether they are radical or incremental. These firms are, in a sense, victims of their own success, as their reputational strength and perceived information superiority encourage the wholesale copying of their offerings. Such firms are frequently given the label of trendsetter or fashion leader, and are often the genesis behind bandwagon behaviors wherein other market actors blindly follow market leaders in the hope of riding their coattails.42 As such, firms with a high level of market competency may be encouraged to look for other sources of differentiation (i.e., not through new product innovation) as a basis for competition. An exception to this are firms such as Apple who have high market competency and are so successful in crafting unique and highly valued products that competitors, even with outright imitation, are unable to develop competitive offerings.
The third implication is that the parsing of signals to guide imitation decision making is more applicable in certain industry contexts, particularly those typified by high levels of information asymmetry and environmental dynamism. It is important to note that firms may pursue imitation for a variety of reasons, including those that may not be grounded in earning economic rents. For example, the sociology literature offers examples of imitation for the purpose of reputational enhancement; firms copy more prestigious peers to burnish their own reputations.43 Such a phenomenon can also be found in the economics literature in the context of inferior managers mimicking the behavior of managers perceived to be superior performers irrespective of the consequences of their actions.44 Interestingly, imitation may itself be a signaling mechanism in that the imitator is signaling to other market actors a desire to keep pace with the competition, and to ensure that it is not perceived as tired or staid.45 Such motivations may occur irrespective of the structural characteristics of an industry. What we are suggesting, however, is that assuming imitation is motivated predominantly by financial considerations (i.e., the desire to improve firm performance); for firms operating in dynamic industries in which market actors are likely to possess highly idiosyncratic knowledge, being attentive to signals encapsulated within a competitor's innovation and understanding how to interpret those signals can be an effective guide in crafting an imitation strategy.