One common measure of a firm’s efforts in innovation is the amount the firm spends on research and development and capital spending (new plant and equipment) relative to other expenditures. Based on 2004 information for U.S. firms in the Standard and Poor’s 500 stock index, innovation measured in this way differs significantly among industries. The highest rates of innovation are in software and services, semiconductors, drugs, biotech, and technology hardware. Somewhat lower levels of innovation are seen in the food and beverage, consumer goods, household products, and automobile industries.

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1. Comment on the differences observed above from a strategic point of view.
2. When compared to large non-U.S. firms in the Standard and Poor’s database, the highest innovators have a similar rate of innovation in the U.S. and non-U.S. firms for the household products industry and the food and beverage industry. However, the rate of innovation is somewhat higher for non-U.S. firms in the auto industry and consumer goods industry, but somewhat higher in the United States for firms in the software and services, drug, biotech, and semiconductor industries. Comment on these differences from strategic and global competitive points of view.