This paper empirically investigates the effects of latecomer firms' internal R&D investment and imitation experience of leading firms' products and technologies on incremental and radical innovation performance. Latecomer firms enter industries with insufficient key resources necessary for securing competitive advantages, such as technology, R&D personnel, investment capital, and market access. Therefore, latecomer firms imitate leading firms' products and technologies and build their own innovation capabilities through internal R&D investment to survive and secure competitive advantages in the market. Based on existing research on latecomer firm innovation, we established hypotheses that latecomer firms' internal R&D investment independently affects firm-level incremental and radical innovation, and that the knowledge diversity of imitation experience moderates these effects. To test the hypotheses, we constructed a panel dataset spanning 10 years (2006–2015) using a sample of 58 Korean pharmaceutical firms—typical latecomer firms—and tested the research hypotheses using a random-effects panel Poisson model. The analysis revealed that latecomer firms' internal R&D investment does not independently affect incremental innovation but has a positive effect on radical innovation. Meanwhile, the diversity of latecomer firms' imitation knowledge and internal R&D investment had a positive interaction effect on incremental innovation, whereas the positive effect of internal R&D investment on radical innovation was attenuated by the diversity of imitation knowledge. The empirical findings suggest that for latecomer firms to succeed in incremental innovation, they should pursue a strategy of imitating across diverse knowledge domains while simultaneously increasing internal R&D investment; in contrast, when pursuing radical innovation, they should increase internal R&D investment while adopting a focused imitation strategy of selection and concentration. Based on these findings, we propose that internal R&D investment combined with the formulation and execution of an appropriate imitation portfolio strategy at the firm level can serve as a useful innovation strategy for latecomer firms.