Why Europe should invest in imitation, not innovation


In economic debates, it is about as close to a mantra as you can get: Innovation is good, and faster innovation is even better. You can never have too much of it.

The World Bank, in a recent report, bemoaned what it called Europe’s “innovation deficit” and questioned whether Europe had “fundamental flaws in its economic environment” that were making it a permanent laggard behind the United States.

But there may be another side to the story. Investing in imitation can have big payoffs for economic growth, and sometimes even bigger payoffs than investing in innovation.

A new paper (pdf) co-authored by Chris Tonetti, a macroeconomist at Stanford Graduate School of Business, shows that some countries are being entirely rational by tilting more toward adopting technology than developing it themselves. In a separate paper (pdf), Tonetti argues that the same is true at the company level: There are only a few Googles…

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