The Changing Structure of Innovation in Computing: Sources and Threats to the Dominant U.S

The computer industry is remarkable for the pace of its technical change over the last half century and for the pace of its organizational change during the 1990s. From its inception in the 1940s, the industry has been characterized by rapid and sustained technical change. Major breakthroughs leading to new uses have punctuated continuous product innovation serving existing uses better each year. For decades, established sellers experienced success based on the persistence of key interface standards linking their proprietary technology to users ' and complementors ' investments. Much of that success arose from these firms ' ability to coordinate and direct the wide variety of different technologies — components, systems, software, and networking — that make up computing. At the same time, the industry offered opportunities for entrepreneurial firms to pioneer new kinds of computers for new classes of users, opening up new markets. The industry is undergoing even more change in the 1990s, and change of a different character. New technologies are being developed and introduced, many by new companies, in an industry organized in a radically new way. The entrepreneurial companies and the established firms no longer coexist, but are in direct competition. Extraordinary returns to capital, and to highly skilled human capital-- rents-- are moving. The rents that used to be earned by vertically integrated firms expert in coordinating multiple technologies now flow to clusters of loosely linked specialized firms. This is a revolution in systems of organizing innovation. At the moment, the "Silicon Valley " system of organizing innovation is on the ascendant, and the "IBM&quot