Innovation, imitation, and growth with cumulative technology

This paper analyzes the interaction of innovation and imitation in the growth process. Technology is assumed to be cumulative: only leaders can conduct next-round innovation. Outsiders can become leaders by imitation. Our results show that subsidizing imitation may increase the economy-wide rate of technological progress. There are cases where competition and growth exhibit positive correlation. In these cases, promoting imitation enhances not only the static efficiency but also the dynamic performance of the economy.