Abstract This paper examines the mechanisms and dynamics of the process of innovation in companies and sectors of the chemical industry. It is based on analysis of science and technology output indicators, namely patents and innovations evaluated in terms of originality and, in the case of innovations, in terms of market success as well. Radical innovation (RI) is identified as the kingpin for the evolution of technologies in both the micro- and macro-economic context, not only because it provides a model for imitation, but also because it turns out to be more profitable for the innovating companies than incremental innovation. At the micro-economic level, this paper examines the significance of diverse driving forces which lead a company to the launching of projects aiming at RI, measures the length of commitment to such projects, and describes the dynamic effects generated by the introduction of a successful RI, and how they affect the company's subsequent R&D and market orientation. At the macro-economic level, this paper identifies the stages of youth, growth, maturity and decline of the subsectors of the chemical industry, examines the distribution of RI and market-successful innovations over the development of a sector, describes the influence of market demand and capital investment on technological advance, and compares the development of national chemical industries. The paper concludes with an account of the dynamics of technological innovation in the chemical industry over the period 1930–1985, which is based on the empirical findings of the previous sections.