Abstract
With the speedy evolution of technological industry, how to co-evolve and benefit from the industry technological systems are becoming important to technology-based firms. The technical competence derived from the knowledge diffusion and variety creation mechanisms appear to be a major force to drive the competitive advantage of the firms. Technology strategic initiatives play a key factor in the co-evolution process, including the selection of technology, the development orientation of core technology, feedback and correction based on the development experiences, coordinate and align technology and market strategies appropriate for the environment at that time. The development of the multi-function printer technological system began from the color multi-function inkjet printer that combined printing, scanning, fax and copy introduced by hp in 1996. Many of the imaging system suppliers, international or in Taiwan, try to make an entry in this market. Most of the Taiwanese firms are specialized in scanning technology with the lack of the printing technology. Knowledge diffusion thus plays an important role for those make a successful entry, while the variety creation mechanisms determine the value creation after the entry. This research conducted in-depth interviews and comparative analysis of the case firms to establish a process model for knowledge diffusion and variety creation mechanisms. Technology-based firms could gain insightful understanding on the nature of knowledge spillover and practice variety creation to establish well-aligned combinations of technical innovation to achieve successful product and market entry.