Technological composition and productive diversification are distinguishing features of countries’ long-term growth trajectories. Investing in research and development (R&D), infrastructure and technology is a possible alternative for developing countries looking to accelerate their growth trajectory. In the case of Brazil, the production structure must be modified and productivity increased, by endogenizing technological advances, in order to narrow the technology gap. The factors that determine investment in absorption of external knowledge must be defined. To this end, a multilevel analysis was performed, based on microdata from the local unit section of the Annual Industrial Survey-Enterprise (Pesquisa Industrial Anual–Unidade Local) and the Survey of Innovation (PINTEC) (2008, 2011 and 2014) conducted by the Brazilian Institute of Geography and Statistics (IBGE). The results bear out the theory regarding the internal determinants of firms’ innovative activities. Municipal determinants appear consistent with the literature only for “machinery and equipment” and “training” expenditure, while diversified spaces have little influence on levels of R&D expenditure.