Job Creation by “Imovation”

Where will the jobs come from? It’s the question of the day and one we hear often in the Office of Advocacy. The answers depend on whom you ask—jobs come from small businesses, innovators, and high-impact fast-growing firms. Is there anything new to be said?

Author Oded Shenkar hardly uses the word “job” in his new book—but he has a fascinating angle on the related topic, innovation. Shenkar, who has written previously about the “Chinese century,” recently authored Copycats: How Smart Companies Use Imitation to Gain a Strategic Edge.

Americans often think imitation is just something businesses are forced to do because they have nothing original to offer. But imitation “is as critical to prosperity as innovation, especially when the two are used together,” Shenkar says.

Shenkar began his talk at the Society of Government Economists meeting in Washington, D.C., with a pop quiz: Who invented the credit card?
     a. American Express
     b. Master Card
     c. Diners Club

The answer is Diners Club—now a bit player in a multi-billion-dollar industry populated by bigger imitators. And what percentage of the value of innovation is captured by the innovators themselves? The answer: 2.2 percent. Most of the value goes to those who see and imitate what has already been developed.

Imitators have an edge over the innovator in several areas. They have a free ride on R&D, can avoid the innovator’s “dead ends,” have the benefit of hindsight and can capitalize on the shortcomings of early offerings. Imitators also have lower overall costs and a shorter time to bring a product to market, are better positioned to achieve higher productivity gains, and have less complacency about being imitated themselves.

Although history is rich with both innovation and imitation, today, Shenkar says, the United States is recognized as the world’s number one innovator, while China is the number one imitator. Both innovation and imitation are needed for economic growth. What the innovators need to learn is not only how to defend their intellectual property from being imitated—for as long as possible—but also how to use the skills of imitating productively themselves.

Successful imitation may not be as easy as it looks. Shenkar explores the secrets of successful imitation and offers ten “rules” for those who would innovate by imitation. The last one is “innovate, imitate, imovate.” I’ll leave it to you to explore the rest.

A final note: if all this sounds familiar to Advocacy’s readers, it should. Renowned economist William Baumol once wrote in The Small Business Economy, “Without breakthroughs such as the airplane, FM radio, and the personal computer, all introduced by small firms, life in the industrialized economies would be very different today. Moreover, without these breakthrough inventions to build upon, the big companies would be confined to a much more restricted body of ideas to which to devote their development activities” ( p. 193).

Instead of cutting the story into small and large businesses, Shenkar focuses on imitation and innovation. But there’s no reason that all sizes of businesses can’t be successful “imovators”—and that’s how many of the small ones become big.

 So where do jobs come from? Copycats offers one more clue.

—Kathryn Tobias, Senior Editor