Innovation, Imitation, and Entrepreneurship: The Introduction and Diffusion of the Homeowners Policy, 1944-1960

Abstract

This paper uses the introduction of the homeowners policy in the United States insurance market in the I950s to explore the process of innovation and the role that innovators (entrepreneurs) and imitators play within it through an examination of Schumpeter’s theory of innovation and its discussion in the recent economic literature on innovation and imitation. Schumpeter’s model of entrepreneurial innovation is tested through a case study of the homeowners policy’s introduction in 1950 and its subsequent diffusion throughout the decade. The policy was an innovative product which helped transform the property-casualty sector of the insurance industry. Thus, this case study supports Schumpeter’s model of entrepreneurial innovation and illustrates the significant role that imitation plays within it.