I think you can use. Go through the literature review, it will give you a fair idea, if you have any doubts. All the best.

Thank you so much..

Straightforward to include both industry and firm level data in a panel data set. As I have understood your framework, the (industry level) FDI inflow effect on innovation would pick up the influence of foreign participation/presence in an industry on innovation; either by knowledge spillovers or by competition, right? Do you measure innovation at the firm level?

Interesting topic. Are you going to recommend/identify the factors that attract FDI?

I hope you intend including the trend and actual organisational investment in R&D in your data collection. Also may need to track inflow of new CEO’s, Marketing Directors and perhaps even Production Managers --- people make the difference. Look also at the rate of adoption of innovation (how long after an industry change is that brought in to the organisation).

May be relevant to perhaps to look at the level of Government activity in promoting innovative industries (e.g. green energy) and changing legislation to facilitate / attract FDI.

I always think first about how to interpret the test results.

Looking to make inferences at the firm level or at the industry level?

Gabriel R.G. Benito I wish to measure firm level innovation too. However firm level R&D data is not available.

Thank you for exactly understanding the objective. My panel results indicate that inflow of industry level FDI suppressed innovation for two giant Indian industries while controlling for firm level characteristics.

Helen Strong Thank you for your suggestion. I wish to include firm level innovation into my dataset. However as data is not available that restricts me to incorporate that. I appreciate your suggestion for incorporating govt policy regarding promotion of Innovation and looking at the internal components of firm that makes difference. Thank you once again for your cooperation.

Cecilia Calderon I was also thinking in the same line regarding interpreting the test results. My test results suggest that industry level inflow of FDI shrinks industrial innovation for two giant Indian manufacturing firms. I believe the results are true for firm level as well. Correct me if I am wrong.

this is just a suggestion

To begin with, the results you got are very interesting and go against what I might expect. But the important thing is that with your results I do not consider that it is possible to affirm something about the companies but to elaborate hypotheses or proposals for future research.

Good luck!

You can include the variables based on both aggregation levels. Just be wary of the interpretation of industry-level effects on individual firms (this would usually be interpreted as some sort of indirect effects of firms' environment).

Yes, you can add both firm-specific and industry-specific variables and regress them together. However, in terms of explanation, you need to be very specific. It is suggested that you create different panels of your results and then proceed with the explanation.