Innovative profits (of the kind conceptualized by Schumpeter) are today bei
ng increasingly created through international corporate networks for techno
logical development. Such profits through innovation are encouraged by newe
r more flexible organizational forms, and further encouraged (unlike in the
conventional perspective on profits and on the incentive to innovate) by k
nowledge flows between firms. Our empirical evidence, based on US patent da
ta, shows that multinational companies are currently more likely to develop
abroad technologies which are less science-based, and less dependent upon
tacit knowledge. However, within the science-based industries firms may gen
erate abroad some technologies which are heavily dependent on tacit knowled
ge, but normally in fields that lie outside their own core technological co
mpetencies. We find some evidence of a convergence in corporate technologic
al diversification across large firms, facilitated by the now common spread
in the use of information and communication technologies (ICT) as an integ
rator of formerly separate technological systems. This has led smaller firm
s to diversify, but giant firms to consolidate activity around those techno
logies that have become most interrelated.