Firm heterogeneity within industries: how important is 'industry' to innovation?

In this paper we assess how important “industry” is to innovation. Our empirical estimates suggest that “industry factors” are, at most, only moderately important for R&D, innovation and innovative performance at the firm level. The results offer empirical support to recent evolutionary theorizing stressing that firms have heterogeneous innovative capabilities and hence differ in terms of performance. But from the perspective of the economy as a whole, “industry effects” are still important. This lends empirical support to the literatures on “technological regimes” and “sectoral innovation systems”. We conclude by arguing that recent evolutionary theory and the literatures on technological regimes and sectoral innovation systems complement each other and enrich our understanding of innovation. 1 I thank Martin Srholec and Bart Verspagen for helpful comments and suggestions on an earlier draft of this paper.