Industry diversity and its impact on the innovation performance of firms

This paper investigates empirically the impact of diversity on the innovation performance of a firm. We created a measure for diversity that mirrors differences in the resource base of firms within an industry and tested its impact in addition to more traditional factors such as technology-push, demand-pull, and firm-size, based on panel data stemming from three representative cross sectional surveys carried out in the years 1996, 1999, and 2002, respectively. In fact, diversity has a significant positive impact on the innovation intensity of firms and thus supports more theoretical findings in this area. We also find empirical evidence for the technology push and the demand pull hypotheses, as well as the importance of competition for innovation.