This article analyzes how the perceived effectiveness of intellectual property protection and
competitive pressure affect firms' innovation strategy choices, concretely, whether to abstain from
innovation, to introduce products that are known in the market but new to the firm (imitation) or to
introduce market novelties (innovation). Using a sample of 1253 German firms from manufacturing
and services sectors I show that the perceived effectiveness of patent protection positively affects
firms' propensity to imitate and to innovate. Having a small or a medium number of competitors
positively affects firms' propensity to imitate and to innovate as compared to being a monopolist
or having a large number of competitors. However, this effect varies with the perceived patent
protection effectiveness. If the perceived patent protection effectiveness is low or medium, both
innovation and imitation are enhanced, whereas if it is high, only innovation is enhanced
