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This is the first study that uses multilevel modelling to analyse regional influence on the decision to invest in innovation activities of firms in a single developing country, Ecuador. Our results indicate that the decision to invest in R&D and in other innovation activities are conditioned by the region in which the firm is located. Regional loan volume, orientation towards knowledge exploitation and intra‐regional‐sectorial R&D spillovers are positively associated with both types of innovation activities, while regional levels of co‐operation and inter‐regional R&D spillovers are only positively associated with the probability of investing in other innovation activities. [ABSTRACT FROM AUTHOR]