This book develops a general 'logic', or heuristic of discovery, to explain the emergence of novelty in individual thought, organizations, industries, and economies. It draws on a variety of literatures, discussing theories of organizational learning, evolutionary and institutional economics,knowledge and language. It brings these together in a unifying framework, and applies that for an analysis of innovation systems and the management of learning.Unification is based on the resource or competence-based view in economics, in combination with a theory of learning by interaction. The central theme of the book is the relation between stability and change. In business literature this theme appears in the relation between exploitation andexploration. In evolutionary economics it appears in the relation between selection and adaptation. The general heuristic shows how exploitation can provide the basis for exploration. The analysis is illustrated with many phenomena and empirical results from the different literatures.