Technology Analysis & Strategic Management

Vol. 24, No. 1, January 2012, 37–50

Modes and orders of market entry: revisiting

innovation and imitation strategies

John P. Ulhøi∗
Centre for Organizational Renewal and Evolution, Aarhus School of Business, Aarhus University, Denmark

This paper focuses on the initial questions of how and when to enter a market from the
perspective of a firm. By entry mode is meant a firm’s strategy (innovation or imitation) for
entering the market in response to environmental changes. Entry order refers to the related
issue of market timing (first-mover or follower). Invention is understood as the conversion of
human creativity, time and financial resources into new ideas. Innovation in turn reflects the
practical and financial return on such investments. While there is little disagreement about
what an innovator strategy is, imitative strategies are more ambiguous. Based on a corporate
technology and innovation strategy perspective, the paper reconceptualises and extends exist-
ing modes and orders of market entry, and in particular clarifies the ambiguity associated with
imitative strategies. Four distinct imitator strategies are identified. The paper closes with a
brief discussion of limitations, avenues for future research, and implications for managers and
affected policymakers.

Keywords: entry mode; entry order; innovation, imitation; imitation strategies; first mover;
followers

1. Introduction
The nature and speed of technological development, deregulation, the lowering of trade barriers
and demographic changes challenges previous ways of coping with change (Williamson and Zeng
2009). This has led to the recognition of market entry as a multidimensional phenomenon, encom-
passing when and how to enter a market and how to stay competitive after entry (Schoenecker
and Cooper 1998). While acknowledging the relevance of economic and industry conditions,
including regulatory and appropriability conditions, the focus of this paper is solely on the firm
level and associated key strategic choices, which therefore precludes addressing other important
institutional issues.
The paper is based on the implicit assumption that follower strategies involve varying degrees
of creative agency. Here, by ‘followers’ is meant agents who imitate the innovator. Although
followers avoid the risks of investing in new and untried fields, they often have to settle for the
leftovers after the first (or very early) market entrants have taken their share. The paper argues

∗ E-mail: jpu@asb.dk

ISSN 0953-7325 print/ISSN 1465-3990 online

© 2012 Taylor & Francis
http://dx.doi.org/10.1080/09537325.2012.643559
http://www.tandfonline.com
38 J.P. Ulhøi

that there is a need to re-examine modes and orders of market entry and to develop a more precise
taxonomy to illuminate the nuances of imitative strategies.
When considering which strategy to use to secure and/or improve the firm’s strategic position,
two fundamental issues need to be addressed in tandem. One relates to the choice of entry mode,
i.e. which specific choice to make (innovation or imitative strategies), while the other concerns
entry order, i.e. how and how fast to enter the market following a specific imitation strategy.
Although in most cases the choice of innovator strategy is fairly clear-cut, they present a variety
of options that deserve more attention. The main focus of this paper is therefore on the choice of
entry mode(s) resulting from being an imitator. Unfortunately, the literature is not very clear on
how to differentiate between innovative and imitative behaviour, and has generally not paid much
attention to addressing the specific strategic choices available to imitators. The aim of this paper
is to fill this gap.
Here, technological innovation refers to: (i) the process of new scientific discovery (invention)
and its commercialisation (science/technology-pushed innovation), and (ii) the recombining of
existing technologies and auxiliaries into a new product, process and/or service and its commer-
cialisation (entrepreneur/market-pulled). In the former case, the discovery can be based either on
existing (albeit not yet fully proven or understood) ideas, or on a scientific breakthrough. Inven-
tion can thus be seen as the conversion of human creativity, time and financial resources into new
ideas, while innovation represents the financial and practical return on such investments. In either
case, the innovative behaviour involved can be seen as economic agency introducing novelty into
the economic system.
Imitation is a rather ambiguous concept, inasmuch as it can involve both creative imitative
behaviour and pure replicative behaviour. The choice of order of entry (first-mover or follower)
is an important strategic issue in relation to the choice of entry mode (innovative or imitative).
While there is some consensus regarding innovation/the innovator strategy, there is significantly
less agreement about imitation/imitator strategies. Given that the majority of firms are imita-
tors, surprisingly little attention has been devoted to the different imitation strategies available.
A firm-level-based strategic framework on market entry modes should therefore include a more
elaborate conceptual framework, one which can identify the wider scope for imitators’ strategic
manoeuvring. Four distinct imitations are proposed, some of which may involve creative behaviour
(and even some R&D activities), while others imply little or no creative agency whatsoever.
Within the dichotomy of first-mover and followers, the latter needs to be further differentiated.
A first-mover choice is normally associated with an innovation strategy, e.g. a firm with a patented
novelty can reap the benefits of being the first to enter the market. If the definition is relaxed a
bit, then being first can also include being in the first wave (first/fast followers) of imitators
(e.g. analogue imitators) with a (slightly) modified alternative. Follower behaviour can be fast
(immediately after the first) or latecomer (varying from medium to latecomers/laggards).
The overriding theoretical question guiding this research is the initial strategy choices for
entry modes and orders and the implications of each for securing and/or improving market posi-
tion. Imitative modes of market entry involve the consideration of different strategies, however.
The aim of this paper is to identify and typologise distinct strategies for firms considering an
imitative approach to the mode and order of market entry. This paper argues that firms have a
variety of different strategic options. The key contribution of the paper is an elaborate frame-
work for strategies available to firms choosing between modes (innovation or imitative strategies)
and associated orders (first-mover or follower) of market entry. In particular, it offers a new
and more differentiated framework for typologising the various market entry strategies avail-
able to imitators. Moreover, it argues that starting out as a non-creative ‘replicating sheep’ does
 Modes and orders of market entry 39

not necessarily prevent the agent(s) from later turning into a ‘creative, emulating or innovating
wolf’.
The remainder of the paper is organised as follows. The next section briefly outlines the research
methodology, including the specific search words and databases used. This is followed by a section
on pioneering modes and order of entry, and one on follower modes and order of entry. In addition
to innovator strategy, four distinct imitator strategies are identified. In the discussion section, an
integrated conceptual framework is proposed which includes the key issues of innovation imitator
and strategy capability. The paper closes with a brief discussion of implications for potentially
affected managers and decision makers and avenues for further research.

2. Methodology
EBSCO, JSTOR and ELIN databases have been used to identify relevant literature. To limit the
scope, and for reasons of quality (in terms of scientific impact), the search has been restricted to
publications that have undergone peer review. However, since relevant articles on the conceptual
and strategic aspects of innovative and imitative strategies cannot be expected to be found under a
single unified concept, several related terms have been used. The search has included the following
terms: innovator/innovative behaviour; pioneer/laggard; leader/follower; first-mover/second-
mover; early entrants/late entrants; firstcomers/latecomers; adaptor, imitator, emulator, reverse
engineering, reverse R&D. Because the narrow focus of this paper addresses initial considerations
at the firm level about which strategy and timing approach to use in response to environmental
changes, the vast body of IO research, which is based on aggregated industry data and addresses
the performance issues associated with innovation and imitative strategies, appears to be less
relevant.

3. Pioneering modes and order of entry: innovators and first-movers

An innovator can be one or both of the following: An individual actor or firm which launches a
fundamentally new product, process, service or technology on the market, i.e. new in the sense
that it has never been tried before (Levitt 1966); an individual actor or firm which introduces a
fundamentally new product, process, service or technology into the market, i.e. new in the sense
that it has never been tried before in the actor’s/firm’s industrial sector.
First-mover advantages may exist because the firm controls some unique resources or foresight,
or may simply be the result of pure luck (Lieberman and Montgomery 1988). However, the duration
of such monopolistic advantages are influenced by the responses of rivals (Lee et al. 2000). The
literature has further specified mechanisms through which first-movers are likely to rewarded (cf.
Kerin, Varadarajan, and Peterson 1992; Lieberman and Montgomery 1998). More specifically,
being the first to enter the market has been associated with learning effects (Smiley and Ravid
1983), pricing advantages following from asymmetric information (Conrad 1983), and as a way
to pre-empt followers’ access to critical scarce resources (suppliers, location, unique physical
and/or infrastructural resources, specialists) and/or ensure that they have high switching costs
(Suarez and Lanzolla 2005).
From an industrial economics point of view, the focus will typically be on the tangible and
measurable effects of such advantages, while a consumer behaviour perspective is also likely to
include intangible as well as less quantifiable effects. Critical learning and information effects are
typical examples of the latter. Being the first to enter the market has been found to give innovators
access to and the opportunity to learn from consumer preferences (Carpenter and Nakamoto 1989).
40 J.P. Ulhøi

Being a first-mover (or being among the very early imitators) may also lead to higher consumer
awareness of the product, and persuade early adopters to stick with the brand to minimise the
perceived risks from buying a different brand from later followers (Hoch and Deighton 1989).
However, an industrial economics or consumer behaviour perspective gives little or no con-
sideration to the role of internal or organisational factors, strategic choices and resources, unlike
the resource-based view of the firm, which recognises that these are essential to securing lasting
advantages (Wernerfelt 1984; Barney 1991). Although the possession of such resources will not
always be enough to prevent imitative behaviour, together with specific differences in organisation
culture, managerial capabilities, information availability and property rights, they can be seen as
obstacles to imitation, and thus as potential entry barriers.
There has been much focus on the tacit knowledge of individuals (Polanyi 1962). This kind of
knowledge has been described as a rare, valuable, difficult-to-imitate and/or substitute resource
(Grant 1996a), which needs to be recognised as critical to survival (Grant 1996b), and for paving
the way to important learning effects (Cho, Kim, and Rhee 1998). In addressing the combined
effects of market and technological changes, the latter authors discuss four possible scenarios
facing a decision-maker aspiring to become a first mover (Cho, Kim, and Rhee 1998, 124).
Lieberman and Montgomery, authors of an SMS award-winning paper (1988), argued a decade
later (1998) for linking first-mover advantages to the resource-based view of the firm, since most
studies of first-mover advantages point to the role of the accumulated resources and capabilities
of market entrants.
However, because of high development costs, first-movers do not always retain their initial
advantage. Technological and market uncertainties, for example, can mean that resources acquired
early on turn out to be of less value later as the market expands, and they are often overtaken
by competitors with better resources and/or capabilities (Lieberman and Montgomery 1998).
Moreover, various commercialisation contingencies may erode some of the benefits traditionally
associated with being the first to introduce innovations onto the market. For example, recent
empirical research has found that first-movers will not necessarily keep their advantages, and
thus risk being leapfrogged by fast followers who are better at combining technological alterna-
tives with a better internal organisation (Kopel and Löffler 2008). Put another way, late-movers’
advantages – ‘free-riding’ on first-movers’ investments, the resolving of technological or market
uncertainties, the higher the discontinuities the more gateways for new entrants, and incumbent
inertia – remain first-movers’ disadvantages (Lieberman and Montgomery 1988, 47).

3.1. Other modes and orders of market entry: imitator and follower strategies
Before exploring different imitative and follower strategies, it may be relevant to briefly outline
how individuals learn through imitation. Current definitions of imitative behaviour often implic-
itly refer to Edward Thorndike’s seminal definition, which states that imitation is learning to
do something from seeing it executed (Subiaul et al. 2004). However, imitative behaviour also
involves what has been called cognitive imitation. In its most simple form, cognitive imitation is
different from observational imitation, which implies that the naïve student copies an expert’s use
of a rule (Subiaul et al. 2004). Evolutionary psychology has persistently argued that some phe-
nomena, such as justice, cannot be imitated from simple observation. Rather, they are understood
through conversation, formal teaching, reading, watching films, etc. (Plotkin 2000). Development
psychology differentiates between emulation and imitation. An imitator, while capable of per-
forming actions to carry out a specific goal, misses the nuances involved in those goals, whereas
an emulator learns the nuances involved, but not the actions or the goal (Li and Kozhikode 2008).
 Modes and orders of market entry 41

Figure 1. Replica.

In emulative imitation, the imitator learns about both the properties involved and their causal
relationships (Want and Harris 2002).
In engineering, the principle of reverse engineering has been widely used to analyse and learn
about the workings and related underlying technological principles of a product and/or system.
This often requires the disassembly of a product or system in order to learn about all the parts
and their interrelatedness in detail, the aim being to reproduce said product and/or system. This
method has been used for many years by the military, for example (Chikofsky and Cross 1990).
An imitative mode of entry is associated with a follower order of entry. Imitative strategies
can be divided into the following strategic options: (i) replica; (ii) mimicry; (iii) analogue; and
(iv) emulation. A replica strategy can be legal or illegal. In the former, the imitator is allowed to
reproduce the original via a licence. In the latter case, the imitator is involved in counterfeiting
activities, i.e. false copies which infringe intellectual property rights, trademarks and/or brands.
The basic elements of a replica strategy are outlined in Figure 1 below.
Luxury consumer goods and/or haute couture and their related brands often attract the atten-
tion of counterfeiters. Where there are low entry barriers, in terms of skills and capabilities, high
demand, limited ability/willingness to pay the price of originals, there are likely to be counter-
feits. Examples include false copies of brands such as Lacoste, Louis Vuitton, Nike, North Face,
Rolex, etc. Such a mode of market entry does not require much insight into the basic workings
of the innovation in question. The acquisition is made possible either by a licence or – if the
technology involved is sufficiently simple – counterfeiting activities. Although a legal replica
hardly involves much freedom of choice with regard to market, price and/or sales volume, a false
replica (counterfeit product) is a perfect example of a fully independent strategic option (albeit
an illegal one).
Mimicry behaviour can either be monomorphic or polymorphic. Monomorphic mimicry resem-
bles the original very closely. Notwithstanding, the aim of a mimicry strategy is not to violate
existing intellectual property rights (IPRs), trademarks or brands. Moreover, the consumer is well
aware that products produced under a mimicry regime are not identical to the original. Cases
of successful mimicry strategies include Burger King (mimicry of McDonalds) and Pepsi Cola
(mimicry of Coca Cola). Polymorphic mimicry can also adopt a more focussed approach, tar-
geting only certain properties of the original. One example of this is Apple’s iPhone, which,
42 J.P. Ulhøi

Figure 2. Mimicry.

among other things, features a big touch-sensitive screen. This, and related features, was soon
imitated by other brands (Nokia, Samsung). Polymorphic mimicry is likely to occur during periods
of ‘non-paradigmatic’ and high technological turbulence, where several imitators are imitating
different technologies at the same time. Television manufacturers, for example, make liquid crys-
tal display (LCD), plasma and light-emitting idode (LED) TV sets. Not until a winning design
(e.g. LED) emerges is such polymorphic mimicry likely to cease. This would occur when the
entire population of imitated innovations has evolved to share the same properties as the original
(innovator). The key ingredients of a mimicry strategy are outlined in Figure 2.
From the point of view of acquisition, this strategy requires the imitator to master reverse
engineering, i.e. the ability to analyse and learn about the workings and underlying technological
principles of a product and/or system. Such a strategic choice typically involves the disassembly
of a product or system in order to learn about all the parts and their interrelatedness in detail. This
in turn is likely to result in the accumulation of basic knowledge, and thus lay the foundation for
an important technological absorptive capability. Such imitative behaviour primarily relies on the
application of knowledge very similar to the firm’s existing technological knowledge base, and is
likely to be highly routinised, i.e. behaviour characterised by being based on standardised learned
solutions to repetitious and regular situations and/or problems (Kesting and Ulhøi 2010).
An analogue imitation strategy can be either functional or structural. A functional analogue
imitation would be similar to the original, albeit with (slightly) different properties, depending
on how the product and/or system works. A structural analogue imitation would have a sim-
ilar, albeit (slightly) altered structure compared with the original. Analogues are well known
in the information and communications technology (ICT) field. For example, a functional ana-
logue can be an updated version of an existing word processor with new features. A structural
analogue could be a competing, but modular, software package, where the consumer may get
the same features if buying the entire package, but has the freedom to buy only that part of
the package needed. Other examples of analogues are Word Perfect, Word for DOS and Word
for Mac. All offer the same product (word processing), but each is based on a very different
structure. The most important components of an analogue strategy are described in Figure 3
below.
 Modes and orders of market entry 43

Figure 3. Analogue.

From the point of view of acquisition, an analogue strategy requires the imitator not only to
master reverse engineering, but also to possess some basic R&D and manufacturing capabilities
related to the technology, together with an evolving absorptive capacity. This adds up to significant
improvements of the imitator’s knowledge base and developing absorptive capability, and allows
for the introduction of alterations and/or modifications to the original innovation. Such imitative
behaviour would allow for the application of knowledge further from the firm’s existing techno-
logical knowledge base, and far from all activity is likely to be routinised, since changing the
problem settings – in contrast to routinised solutions – would require new solutions (Kesting and
Ulhøi 2010).
Emulation is a strategy where the imitator strives to equal, excel and/or surpass the original
through creative imitation. Figure 4 shows the basic constituents of an emulation strategy.
This is by far the most sophisticated and advanced form of imitation. Most incumbent innovators
are likely to be practising emulative imitation most of their creative time. From the point of view
of acquisition, such a strategy involves not only reverse engineering, but also the mastering of
generic or advanced R&D and manufacturing skills, so the end product not only performs as
well as the original, but is often better. A good example of emulative imitation is the Japanese
motorcycle industry, where, within a fairly short period of time, a few Japanese manufacturers
(Honda, Yamaha, Suzuki) almost put many existing incumbents out of business (in particular
Triumph, Norton, BSA). What they did was not only to offer similar bikes, but bikes with more
pipes and a significantly improved technical performance (in terms of speed and acceleration)
and reliability. Only very recently have some of these manufacturers reinvented themselves and
experienced renewed growth. Surpassing a recently marketed innovation implies the acquisition
of knowledge that may be unrelated to, and distant from, a firm’s present business areas and
technological capabilities. The related behaviour is increasingly non-routinised and involves active
search processes. Deliberate and purposeful changes of existing routines (Nelson and Winter 1982)
are thus expected to take place in such situations. As in the case of an original innovation, slack
resources (organisational assets) become increasingly critical.
44 J.P. Ulhøi

Figure 4. Emulation.

4. Discussion
Whereas mode of entry involves different strategic choices, order of entry is more bounded,
and cannot be adequately addressed in isolation from enforceable intellectual property protec-
tion regimes. Often, sustained profits in sectors with long and costly test and approval regimes
may not be possible without adequately protected intellectual property rights, because it means
that incumbents bear the development costs and initial losses while imitators cream the profits.
Imitators of this sort are thus the very justification for an enforceable IPR protection system.
From the point of view of proprietary knowledge and owners of strong trademarks and/or
brands, almost anything that is not an original innovation may be perceived as an attempt at
parasiting. However, parasiting will cease when all term-expired patented technology becomes
publicly available. The proponents of the patent system have long accepted the problem of high
private costs. Its incentive function works better if patents are strictly enforced, however. A lot
of problems arise not because of the existence of an IPR system, but because protection is weak.
However, as rightly pointed out by Lieberman and Montgomery (1988), in many industries, patents
often only offer weak protection, because they have transitory value and/or can be ‘invented
around’ (p. 43).
Innovators and creative imitators are not necessarily evenly distributed across industrial sectors
or geographical regions. Sectors with decreasing product life cycles (i.e. an increasing rate of new
product launches) could benefit from well-timed innovative imitation strategies. Timing is impor-
tant, since a follower strategy that is delayed too long may result in other price-reducing imitators
getting to market first. Similarly, illegal false copies (counterfeits) may also be distributed unevenly
across industrial sectors and geographical regions. Industries with low entry barriers in terms of
knowhow and production capabilities are more likely to be plagued by counterfeits than those
with higher entry barriers in terms of scientific and/or tacit knowledge. A false replica strategy is
more like to be indirectly ‘encouraged’ in geographical regions where IP enforcement is weak.
 Modes and orders of market entry 45

While previous research has focussed on followers and macro aspects of related catching-
up processes, less attention has been given to firm-level aspects (Li and Kozhikode 2008).
Hesitant or lagging behaviour on the part of imitators can, for example, also be due to man-
agerial and/or entrepreneurial decadence (Brozen 1951). Hobday, Rush, and Bessant (2004)
have shown that an imitator strategy can result in technological leadership, as in the case of
Korea – providing it is accompanied by necessary adjustments in the institutional and legal set-up
surrounding the imitation industries.
In a Strategic Management Journal reported survey of first-mover advantages, it was con-
cluded that, although entry order effects do exist, they are better described as interactions than
direct effects. The magnitude of first-mover advantages seems to vary significantly across prod-
uct markets and location. Last but not least, they tend to dissipate over time (Lieberman and
Montgomery 1998). Case studies of Japanese and Korean semiconductor manufacturers (Cho,
Kim, and Rhee 1998) have shown that followers can successfully challenge industry leaders,
and that different tactics are available to partly overcome followers’ disadvantages (ranging from
focus, through loss-bearing, to volume-building) and exploit latecomer advantages (odd timing,
time compression, technology transfer, benchmarking, technological leapfrogging during rapid
changes). The Indian pharmaceutical industry is another interesting case of an entire industry
that has successfully made the transition from being purely replicative, to being creative, before
arriving at the inventive stage of R&D behaviour (Kale and Litle 2007). One possible explanation
for this success may be that the Indian pharmaceutical industry was not involved in the decision
to accept World Trade Organization (WTO) and Trade-related Aspects of Intellectual Property
Rights (TRIPs) standards. Rather, the industry developed its own partnering strategy. However, it
could be argued that the Indian government had sufficient insight to realise that the pharmaceutical
industry was strong and innovative enough to survive under the new conditions.
Studies from China have further shown how cooperative market entry strategies (distribution
agreements) have been used as a ‘Trojan Horse’ to gain access to the innovator’s technology and
processes, combined with own low-cost resources. Interestingly, such imitative product develop-
ment behaviour has paved the way for later development of original products and innovations
(Minagawa, Trott, and Hoecht 2007). However, because of cultural differences, attempts to raise
awareness of counterfeiting, which may work in some western countries, do not necessarily work
in other countries. In the case of China, for example, such attempts can even be counterproduc-
tive, in that they tend to help promote the products of the counterfeiters (Minagawa, Trott, and
Hoecht 2007). Another Chinese cross-industry study comparing the effects of innovation and
imitation strategies on new product performance found that innovation strategies tend to lead to
improved product performance, and that increasingly uncertain market demands and fast-changing
technologies tend to favour innovation strategies (Zhou 2006).
Zeng and Williamson (2007) point to the critical role of China’s capacity to exploit what
the authors refer to as ‘cost innovation’. This implies that the Chinese should not be regarded
merely as low-cost competitors. Rather, their business model seems to have disruptive prop-
erties, allowing Chinese companies to produce high-tech at low cost while at the same time
offering a large choice for what used to be considered mass markets. Moreover, according to
the authors, this cost-innovation strategy has been made possible partly because of their
appreciation of open-innovation principles and their ability to exploit alternative available IP,
and partly because of the fact that their large domestic markets are still largely unserviced by
foreign providers. The fastest-growing new markets and entrepreneurial opportunities are to be
found among the billions of poor people (‘Bottom of the Pyramid’ arguments of Prahalad), which
is reflected in Zeng and Williamson’s book in their notion of cost innovation. This is as much about
46 J.P. Ulhøi

Figure 5. The innovator–imatator strategy–capability framework.

market development as market entry. In an increasingly global and more connected economy, the
new key economies of China and India should therefore be considered together. High-volume,
low-margin, product-based and increasingly modularised manufacturing principles and business
models, which yield high total gains for much lower returns per customer, are likely to generate
equally disruptive innovations from that part of the world. Put another way, cost-innovation strate-
gies start by opting for increased volume sales at lover margins for a given innovation, allowing
the actor to produce a cash stream which can be invested in fast R&D of the range of products or
services, thus pushing production towards higher-value segments in the market.
As can be seen from the conceptual framework in Figure 5, the different strategic imitator
options and required capabilities can be organised according to which end of the continuum
they belong. The closer to the left, the more creative and innovative the behaviour. Similarly,
behaviour on the right side of the framework has little or no immediate creative or innovative
potential. In terms of capabilities, going from the right side of the figure (pure imitation) to the
left side (creative imitation) implies a shift in capability configuration from basic to generic, and
eventually advanced, capabilities.
The overall picture is more complex, however. According to contemporary research, the increas-
ing availability of information on innovations encourages imitators to wait (Ethiraj and Zhu 2008).
Studies have also shown that, in some industries, e.g. mutual funds, the entry timing advantages
of first- and early-movers are resistant to erosion by new entrants, despite low barriers to entry and
imitation, because resource position barriers are associated with the performance of incumbents
(Makadok 1998, 693).
While the conventional closed-innovation model thus has to cope with free-riding and coun-
terfeiting activities, the open-source innovation model does not seem to have the same problem.
 Modes and orders of market entry 47

Choosing an adequate mode and order of market entry, however, does not necessarily guarantee
commercial success of the innovation or creative imitation. Results from the field of management
of innovation and technology suggest that incumbents are not necessarily wrong-footed by the
technology itself or by their failure to foresee the potentially disruptive nature of such technol-
ogy, i.e. the radicalness of the innovation. Rather, their eventual downfall is due to a failure to
address this potential and incorporate it in their existing business model (Christensen 1997). This
suggests that what was originally a successful business model eventually becomes a key barrier
and potentially life-threatening obstacle for incumbents, since these models have an inbuilt ability
to ‘blind-off’ the managers (Chesbrough and Rosenblom 2002). What remains, therefore, is an
issue of strategic significance for innovation strategy: how can incumbents avoid being trapped
in highly routinised behaviour created by previous successes and manifested in business models?
This in turn suggests that incumbents tend to succeed or fail because of the fit, or lack of fit,
between business models and organisation structures and the management processes and values
that support them (Miles et al. 2009).

5. Implications
From a practical point of view, the framework outlined above has some important implications.
First, it replaces the stereotyped dichotomy of entry modes (innovation and imitation) with a
more detailed strategy framework. Second, it provides additional conceptual clarity, especially as
regards imitation. Furthermore, it provides a more balanced presentation of the two archetypical
modes of entry order (leader and follower) while at the same time emphasising that the one
does not necessarily preclude the other, but can in fact be pursued at the same time in the same
organisation. Third, it calls for more careful consideration when choosing a strategy for securing
or reinforcing a firm’s position in entrepreneurial and highly competitive markets.
Patents are widely recognised as a means to protect truly novel technology. However, tech-
nological knowledge stored in patent databases can be seen a means for potential imitators to
access novel technology. This presents ‘would-be’ imitators with the following two choices: (i)
a licensing agreement (in the case of an effective IP enforcement system or high morality), or
(ii) pursuing an outright infringement strategy (in the case of a weak IP enforcement system).
With regard to (i), the extent to which such agency equals imitative behaviour (e.g. in the shape
of a replica strategy) can be questioned, since license holders normally do not have the freedom
to choose their markets, pricing or sales volume – all such decisions are dictated a priori by the
licensing contract and by agreement with the patent holder. Thus, imitators in this sense can choose
whether to imitate or not, including whether to be on the ‘right’ side of the legislative regime. If
such imitators have to bargain and are essentially under the control of the patent holder, then the
licensed firm can be seen as an effective tool of the patent holder’s strategy for developing his
patented technology. However, the outright infringement approach to a replica strategy remains
full independent choice.
There may, however, also be good reason to reconsider the phenomenon of
counterfeiting – not only because it seems to be intrinsically linked to the behaviour of existing
innovators (pricing policies of IPR owners), but also because the slowness and cost of legal
measures against counterfeiting behaviour during high technological turbulence hampers their
effectiveness (Trott and Hoecht 2007). Some have even found that counterfeiting behaviour may
contribute positively to innovation (Givon, Mahajan, and Muller 1995). Not all counterfeiters are
necessarily unworthy to be partners (Minagawa, Trott, and Hoecht 2007; Trott and Hoecht 2007)
and/or without interesting resources (in terms of production capabilities, insight into local market
48 J.P. Ulhøi

preferences, etc). ‘If you can’t beat them, join them’is a philosophy that might justify such partner-
ships. This would also allow a narrower focus on fewer and really damaging counterfeiters. Given
that counterfeiting is here to stay, there is also a need to reconsider where to locate strategically
valuable R&D activities – abroad or at company headquarters (Trott and Hoecht 2007).
Clearly, regional and cultural differences and the role of government may affect the transition
from imitative to innovative behaviour. In emerging economies, for example, regulative institutions
and related property rights and capital markets are typically still underdeveloped (Peng 2003).
The design of intellectual property rights (IPR) regimes in emerging economies tends to support
local players, often allowing them to get away with imitative behaviour during the early stages of
development (Mahmood and Rufin 2005). However, once a country has reached a certain stage
in development where imitative behaviour can be replaced by innovation, stronger intellectual
property laws tend to prevail. This has been reported in Japan, Taiwan and Singapore (Hu and
Mathews 2008), and later in India (Kale and Litle 2007) and Korea (Kim 1997). However, IPR
is not alone in playing an important role in the growth of Asian tigers. The strong use of public
research institutes has also been found to play a pivotal role in guiding and focussing innovation
efforts (Hu and Mathews 2005).
It is of the utmost strategic importance for an individual enterprise to be able to distinguish
between the different types of innovative and imitative strategic options and related tactics. Since
each type plays a different role in a firm’s existing business model and product portfolio, they will
require different management tactics. More radical innovations can transform an entire existing
industry, and are thus unlikely to be functioning within the framework of an existing business
model and resource configuration. This will require a new business model and new routines. More
incremental innovations, however, can probably work with minor adjustments of the business
model and resource configuration. More research is needed to clarify the linkages between the
shift in market entry (innovation or imitation strategies) and the existing business model of the firm.
Obviously, the proposed conceptual framework and included strategies should be submitted
to empirical tests. In particular, it would be interesting to carry out in-depth field studies to help
determine the specific circumstances under which they are applied. Similarly, there is a need for
empirical research to determine which kind of innovation would benefit from being developed
under which entrepreneurial approach. It would also be relevant to investigate the costs of the
different strategies. Since improved variants of original inventions are often successful, creative
imitators can reap profits with little consideration to primary development. Such ‘bottom-feeders’
in the overall innovation system need more attention in future studies. Do they, for example,
scour the patent database looking for ‘interesting’ weak patent positions? To the knowledge of
this author, there has been little or no investigation of this interesting phenomenon in any detail.
Last but not least, it may be useful to carry out comparative studies of imitative behaviour and
the role and importance of national cultures and differences in institutional set-ups.

6. Conclusion
The paper has some limitations. First, it does not address the role and importance of economic and
industry conditions, including regulatory and appropriability conditions. Second, industry sectors
also matter. Protective measures, such as patenting, appear to be effective only in a few industries,
e.g. pharmaceuticals, and often have only transitory value and can be ‘invented around’ in many
other industries (Lieberman and Montgomery 1988). In addition, imitation costs vary across
industries. Pharmaceutical imitators, for example, face relatively higher costs (than imitators in
other industries), since they are subject to the same rigorous regulatory approval procedures as
 Modes and orders of market entry 49

innovators in the industry (Lieberman and Montgomery 1988). Similarly, and unlike less esoteric
sectors (e.g. low-tech manufacturing, ready-made food), it can be argued that the knowledge-
intensive service sector calls for an integrated and systemic approach. This makes the sector
less accessible to infiltration by new and less experienced entrants, owing to the accumulated
difficult-to-copy intangible assets associated with intensive service provision.
This paper has shown that the unsuccessful exploitation of innovative and imitative behaviour
is due to certain critical circumstances. Where the former primarily relates to a lack of fit with
existing business models and/or failure to replace existing business models, the latter relates
to timing issues, i.e. how long it takes to adopt the new technology (decision to follow). The
key contribution of the paper is that it provides an extended strategic framework for identifying
distinct modes and orders of market entry and related tactics. The paper concludes that, although
the borderline between innovation and imitation is sometimes blurred, there are good reasons for
maintaining a clear distinction between the two concepts. With regard to the latter, there is a need
to further differentiate between different imitative behaviours and associated tactics, inasmuch
as both phenomena represent generic and perfectly viable strategies that support the existence of
entrepreneurial markets.

Acknowledgements
Useful comments and suggestions to an earlier version of this paper from Charles C. Snow and John Howells, from par-
ticipants at the ISMD 2010 conference and two anonymous reviewers are much appreciated. The usual disclaimers apply.

Notes on contributor
John P. Ulhøi is Professor of Organization and Management Theory and Head of the Centre for Organizational Renewal
and Evolution (CORE) at Aarhus University. His research appears in journals such as JBV, ETP, JOB, TASM, CIM, IJTM.
His research interests include organisation and management studies, organisational renewal, technology and innovation
management.

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