Capitalism, profits and innovation in the new techno-economic paradigm

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.