Technological backwardness is the common problem for all developing nations. The acquisition and creation of advanced technologies are the common dreams of these catch-up economies. How to build up the adequate technological innovation system for high-tech industries is the major challenge to all catching-up economies. Because of the success of technological development, this research will investigate the technology innovation and diffusion system by taking the IC industry in Chinese Taipei as a case study. The purpose of this research is the provide a guide for the future direction of technological innovation and diffusion systems and of share experience on the development of technology in the IC industry of Chinese Taipei with other catch-up economies. This paper first presents hottest study topics: Knowledge Management and National Innovation System (NIS), next introduced two analytical frameworks --- the technological trajectory framework and the multiple cooperation framework --- which are used as tools to describe the evolution of technological development in catch up economies. It will then propose a technological innovation and diffusion system for catch up economies. The structure and components of the system will be discussed and a questionnaire survey designed for the IC industry in Chinese Taipei. The results of the survey will be discussed and future development of the technological innovation and diffusion system of the IC industry in Chinese Taipei will be proposed by this research.