This paper contributes to the analysis of the persistence of innovation activities, as measured by total factor productivity (TFP), and explores its internal and external determinants stressing its path-dependent characteristics. The external conditions, namely the quality of local knowledge pools and the strength of the Schumpeterian rivalry, along with the internal conditions (the actual levels of dynamic capabilities, as proxied by wage levels and firm size) exert a specific and localised effect upon the persistent introduction of innovations. A multiple transition probability matrixes (MTPMs) approach has been implemented to capture the contingent effects of external factors on long-term innovation persistence. The empirical analysis of the dynamics of firm-level TFP for a sample of approximately 7000 Italian manufacturing companies observed during the years 1996–2005 is based on both the comparison of different transition probability matrixes and on dynamic discrete choice panel data models. The evidence provided by the test of MTPMs in sub-periods suggests that innovation persistence is path-dependent, as opposed to past-dependent.

The COVID-19 crisis has revealed the deep technological and production dependencies of the EU on third countries in sectors deemed as particularly strategic and has thus fuelled the debate on (the lack of) European technological sovereignty in critical fields. This article argues that in the light of a renewed interest in relaunching a European industrial policy, technological sovereignty considerations must be fully incorporated into policy objectives and instruments.