Is product imitation a way to go in China?

CHICAGO, Nov. 6, 2012 /PRNewswire-USNewswire/ -- In a recently published study, researchers have shown for the first time that pure imitation and creative imitation are two separate product imitation strategies that produce different performance outcomes to foreign and domestic Chinese firms. Pure imitation is a direct replicate of pioneers' originals; whereas creative imitation is a "copy-but-improve" approach. 

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Both pure and creative imitations are prevalent practices particularly in transition economies and yet their performance outcomes are far from clear. To solve this myth, the study, conducted by Ruby Lee at The Florida State University and Kevin Zhou at The University of Hong Kong, was published in the September issue of the American Marketing Association's Journal of International Marketing. 

Based on a survey of 384 top and middle managers of 192 companies in China along with their financial data collected in China, the study reveals that all else being equal, creative imitation seems to generate higher financial performance (i.e., two-year lagged ROA) than pure imitation and none of imitation strategies matters to immediate market performance (i.e., market share).  However, "the story becomes different when a company's internal marketing capabilities and socially constructed identity are considered," Lee says.  Strong marketing capabilities help companies better distinguish their imitative products from originals and "yell out" even louder for creative imitable products than direct replicates, which leads to higher market share.  

The study offers further insights to foreign companies that operate in China. The researchers argue that customers in transition economies tend to view foreign companies' products as more original.  Such legitimacy gives foreign companies an advantage to adopt pure imitation – an approach likely to be fast and cheap – to quickly enter the market and build their shares.  However, in the long run, "both imitation strategies are costing foreign companies big time – the discrepancies between the foreign firms' perceived innovative identities and their copycat products will tarnish their reputations, hurting their financial performance," Lee says.

The research indicates that a foreign firm could be better off to adopt more pure imitation when first entering the market to quickly establish its foothold. Going forward, it should stay away from imitation and gear toward innovation to outperform Chinese imitators in the long run.  For domestic firms, product imitation is probably a way to go in China as evidence in their stronger financial performance than their foreign counterparts.   

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SOURCE American Marketing Association