In this thesis a model to describe the diffusion of a cluster of inter-related innovations is put forward. Unlike conventional diffusion approaches, which deal with each innovation independently, this model is based on a system of "aggregated measures of diffusion" (AMDs). Such AMDs assume a common technological base and a learning sequence in adoption, and they are derived from a system of double weighting, with scores attached for a) the complexity of each innovation and b) the time-span since adoption. In addition to diffusion measurement, AMDs can be used to assess technological capability of individual firms, industries, regions or countries. In this role they can replace conventional technology measures, particularly when the object of analysis are "traditional industries" or "catching up regions". In the present application, the diffusion of nine innovations available for use in the clothing industry was tracked. Alternative weighting schemes generated different AMDs, successively taken as the dependent variable in a multiple regression exercise. The variables entered into the model matched broadly the conceptual framework, with proxies of technological competence ("qualified technicians" or "intangible investment") and firm size ("sales" or "employment") displaying greater association with the AMDs. Interestingly, the dummy "country" was not selected as significant. This is in line with previous findings in the thesis, which showed an average initial lag between Portuguese and Italian firms of 4 years, narrowing to 2.5 years as diffusion proceeds. These results suggest that the productivity gap (2.6: I) derives mostly from factors other than differences in the adoption of recent hardware. Future policies to narrow this gap could better consider how to improve the handling of existing hardware (training, skills) and other intangible factors (design, quality, marketing and distribution), than concentrating exclusively on fixed capital formation. If these intangible factors are addressed by public policy, it is possible to believe that the Portuguese clothing industry will have an opportunity to survive and prosper. With regard to Italy, there are signs that some of the traditional factors of competitiveness have suffered recently a process of erosion. With the expected phasing out of the MultiFibre Arrangement, Italian tirms must concentrate further in up-market niches and relocate part of their assembling operations to lower cost regions abroad. The possibility of radical technological change reversing dramatically this industry'S pattern of comparative advantage is not a realistic prospect in the short/medium-term. However. the likelihood of full automation in a longer-term remains, and it is possible to expect that those firms which have gone further in adopting certain LT.-related innovations will have a decisive advantage early next century.