their own unsuccessful innovations and the successful 

 innovations of others. Fundamentally, a Soviet organ- 

 ization competes not against other facilities but in- 

 stead against its own past performance record. In ac- 

 cord with the principle of planning from the achieved 

 level, its targets are set predominantly in relation 

 to its own earlier institutional results. This also 

 explains in part why the rate of diffusion of innova- 

 tions is also lower in the USSR than in the United 

 States. New products simply do not drive out old 

 technology under Soviet operating conditions as rapid- 

 ly as they do in a competitive market. 



Finally, the two systems differ in their capacity 

 to accommodate and discharge the innovation function. 

 In the US large companies are frequently not good at 

 innovation. They exhibit, in fact, the same kinds of 

 vested interests in and preferences for established 

 products and processes, set styles of organizational 

 behavior, and conservative management outlook that 

 characterizes many Soviet organizations. The key role 

 in innovation is played by the small company or tech- 

 nological entrepreneur that is able, again and again, 

 to break into the system with new technology and tech- 

 niques. Although relatively good at innovation, the 

 entrepreneur or small business, however, generally 

 lacks the capabilities to mass produce and market the 

 innovation. These skills lie with the large companies 

 that often become major customers for the high tech- 

 nology products of the small ones. The large compa- 

 nies may also buy the small company since the risk of 

 the established new technology is now diminished. Such 

 a merger permits the parent company to evolve and re- 

 new itself. In general, then, the small innovating 

 firm introduces a healthy competition to established 

 companies. 



In the USSR such a healthy symbiotic relationship 

 does not exist. Indeed, the system does not provide 

 the conditions of entry whereby the technological en- 

 trepreneur can easily emerge, much less succeed, out- 

 side the network of established institutions and ar- 

 rangements. Under traditional operating practices 

 individuals and organizations who are both capable of 



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