The concepts of technology and innovation have been central in the new economic analysis of growth and competitiveness. This book contributes to recent thinking on the relationship between technology and competitiveness by examining the importance of, sources of, and barriers to, technological upgrading in transition economies (TE). Unlike much of the previous literature on the subject, this research develops a model which takes into account the complex and comprehensive features of technological capabilities. Amongst these features, the international technology diffusion and the ?erosion? of National System of Innovation (NSI) in the course of transition have been specifically addressed. The empirical evidence presented in this book highlight the importance of innovation and interaction and collaboration with international enterprises, between firms and institutions in geographic proximity, and with NSI and NSI policy. Essentially, the suggested importance of capabilities intrinsic to the firm and constructed through complex process of technological learning and interdependencies shed some light on the indicated growing wedge in terms of technological performance amongst TE.