on every major industry.4 The diffusion of steam power and electric power provide examples. According to Freeman and his associates, these periods of economic transformation depend upon the consolidation of a new technological system or techno-economic paradigm. The new system or paradigm encompasses a broad range of related technological development that goes beyond the best known major innovations that characterize the leading sectors.

In this context, a technological paradigm is defined as a widespread cluster of innovations that represent a response to a related set of technological problems, based on a common set of scientific principles and on similar organizational methods.5 The organizational methods associated with different paradigms require the support of different kinds of social institutions. Therefore, it is not surprising that with the emergence of a new paradigm technological leadership tends to move away from a society whose institutions were particularly geared towards problem-solving activity within the confines of the previously prevailing paradigm. Leadership is likely to pass to a society whose institutions are more adaptable to and better represent the organizational structures needed to promote the most pervasive new technologies.

In a new technology paradigm every country must adjust its national system of innovation. The national system of innovation is the network of institutions in the public and private sectors that support the initiation, modification and diffusion of new technologies.6 In the paradigm based on mass production that dates from the interwar period, U.S. institutions led the way. The typical national system of innovation relied on the establishment of specialized corporate R&D departments, increasing state involvement in civil science and technology, and the rapid expansion of secondary and higher education and industrial training. The new technology paradigm now taking shape is instead grounded on the economies of scope gained through an interaction between flexible but linked production facilities, in which individual plant flexibility and network linkages both depend upon the new information and communication technologies. The pioneers in this case are Japanese institutions. The appropriate national system of innovation today emphasizes the closer integration of R&D, production and marketing within firms, technological cooperation between firms, generalized education and training to provide a work force with multiple rather than specialized skills, and state support for generic technologies.


J.A. Schumpeter, Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process, 2 vols. (New York: McGraw Hill, 1939).


G. Dosi, Technical Change and Industrial Transformation (London: Macmillan, 1984).


C. Freeman, Technology Policy and Economic Performance: Lessons from Japan (London: Frances Pinter, 1987).

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