The success of Japanese industry and of some industries in the Emilia-
Romagna region of Italy in the 1970s and 1980s has stimulated interest
in new models of industrial organization. Interest in applying such m
odels in developing countries is increasing rapidly. Evidence from dev
eloping countries shows that models are a useful starting point, but t
hat it is essential to consider the diversity of developing country ex
periences and to understand the processes by which firms and sectors a
re transformed. This paper focuses on the trajectories of change taken
by firms which reorganize their production and by clusters of firms.