Economic Organization, Innovation Systems, and the Internet

How can public policy best promote successful innovation inthe Internet sector? This paper creates a typology of differenttypes of Internet software firms. Institutions associated withthe ‘Silicon Valley Model’ are a strong driver ofsuccess for some key Internet technologies. However, patternsof human-resource development and knowledge management varywidely across Internet technologies, necessitating the developmentof very different commitments between managers and employees.Institutional frameworks associated with ‘organized’economies, such as Germany or Japan, might provide superiortool-kits to help some types of Internet firms to innovate.Furthermore, our analysis suggests that the creation of institutionalincentives is not the only way to promote patterns of technologicallyintense innovation associated with Silicon Valley. Technologicalstrategies of dominant firms are often equally important. Regardlessof institutional environment, the development of entrepreneurialsoftware firms can be strongly influenced by the activitiesof large firms working within core network telecommunicationtechnologies.