This paper identifies four groups among 113 Fortune 500 manufacturers
that approach innovation quite differently. The groups are based on 27
measured elements of corporate environment, corporate strategy, and f
ormal and informal organization. Both product innovation and financial
performance differ significantly over the groups, and a group of 42 f
irms that invest heavily in innovation perform best financially. A sma
ller group of firms that are not innovative but which follow a strateg
y of acquisition perform nearly as well financially. Firms focusing re
search resources on process innovation perform poorly, although proces
s research complements product research among the effective innovators
. Particularly important for explaining both product innovation and fi
nancial performance of these firms are salient combinations of classic
elements of good environment, good strategy and good organization-str
ong positions in growing markets, investment in research and developme
nt, open and creative organizational structures and supportive organiz
ational climates.