Abstract
Strategy research is divided on whether imitation erodes or builds competitive advantage, with contradictory theoretical assumptions and sparse empirical evidence. We address this impasse using text-based measures that capture latent information on imitation as strategic convergence around innovation topics. Analyzing nearly ten thousand annual reports from S&P500 firms across fifteen years, we provide novel large-scale empirical evidence reconciling static and dynamic imitation theories. Imitation benefits shareholder returns and short-term operational performance via capability building but erodes long-term profitability. Critically, we establish boundary conditions: sectoral uncertainty enables learning and amplifies imitation benefits, whereas global uncertainty creates strategic paralysis. Firm strength shows minimal moderation, rendering imitation as a democratic strategy. Our findings integrate temporal, environmental, and organizational contingencies governing when imitation builds versus erodes competitive advantage.