This book examines the dynamics of competence building process at the firm level in a sample of leading Japanese and European companies engaged in the field of optoelectronics. The concept was derived from the notion of firm specific competences which are closely related to the firm’s intangible assets and accumulated technological bases. Several factors affect the rate and direction of competence building, chief among them being primary markets, top management strategy and the evolution of the R&D organization, and organizational learning. A novel technique is introduced to assess competences using three types of data on US patenting, scientific publications and qualitative interview data.