Growth and Cycles

Incumbents can survive through imitation: Unlike standard Schumpeterian models where entrants replace incumbents, successful imitation allows established firms to remain competitive alongside innovators

Endogenous market structure emerges: The number of firms per sector becomes endogenous, determined by the relative success of innovation versus imitation efforts

Extended firm lifetimes: Both innovation and imitation mechanisms create longer average firm survival compared to pure creative destruction models

Modified Arrow replacement effect: When incumbents can imitate rather than being displaced, the traditional replacement effect may not hold, allowing both entrants and incumbents to invest in technological progress

Extended quality ladder model: Builds on standard Schumpeterian growth framework but allows multiple firms per sector through successful imitation

Dual innovation processes: Entrants engage in radical innovation while incumbents can attempt to copy new technologies through imitation effort

Endogenous firm dynamics: Market structure evolves based on success rates of innovation and imitation, creating realistic industry concentration patterns

Competitive equilibrium with multiple firms: When imitation succeeds, profits are shared among the original innovator and successful imitators

Dynamic general equilibrium: Integrates innovation and imitation decisions with standard RBC framework for business cycle analysis

Competition policy: Regulators must distinguish between concentration arising from superior innovation versus that resulting from legitimate imitation and learning

Innovation incentives: Both breakthrough innovation and rapid imitation contribute to technological progress and economic growth

Industry evolution: Model explains realistic patterns of firm turnover and market concentration across different sectors

Firm strategy: Companies face strategic choices between pioneering new technologies versus quickly adopting and improving existing innovations

Growth theory: Technological progress stems from both creative destruction and incremental improvements through competitive imitation