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

In this paper, we assess how important ‘industry’ is to innovation. Our empirical estimates show that ‘industry factors’ matter little to how firms’ search for new innovations and that firms within the same industry have widely different perceptions of the obstacles constraining technological change. These results offer empirical support to recent evolutionary theory where firms have heterogeneous capabilities and pursue different approaches to innovation. Structural variables at the industry level have a stronger influence on firm innovation. This result supports ‘sectoral innovation system’ approaches where firms are more ‘constrained’ by technological regimes underlying industry evolution. Hence, the driving forces behind technological evolution are found at both the firm and industry level, but to different degrees. [ABSTRACT FROM AUTHOR]