What is the imitation problem resulting from technological advance? How might a dominant firm respond to the threat from product innovation by a smaller firm?

What will be an ideal response?

The imitation problem is that the rivals of a firm may copy or emulate the firm’s product or process, and thus decrease the profit from the innovator’s R&D effort. A dominant firm might use a “fast-second” strategy that involves quickly imitating the successful new product of smaller competitors with the goal of becoming the second firm to adopt the innovation. The dominant firm then depends on its marketing skills or economies of scale to eventually capture market leadership.