Is the Tendency to Variation a Chief Cause of Progress?

This paper briefly reviews the sources of the diversity of innovative activity within industries, and interprets the literature to suggest that there are three ways in which such diversity may stimulate technological progress, including a selection effect, a breadth effect and a complementarity effect. Using industry-level data from the Yale survey administered in the 1980s, the paper presents preliminary empirical results on the relationship between the diversity of R&D activities within industries and their rate of technical advance. This exploratory exercise finds that, controlling for industry R&D intensity, greater diversity in innovative activity is associated with a more rapid pace of technological change. Policy implications are considered. Copyright 2001 by Oxford University Press.