The importance of project-based firms is increasing, as they fulfill the growing demands for complex integrated systems and knowledge-intensive services. While project-based firms are generally strong in innovating their clients' systems and processes, they seem to be less successful in innovating their own products or services. The reasons behind this are the focus of this paper. The characteristics of project-based firms are investigated, how these affect management practices for innovation projects, and the influence of these practices on project performance. Using survey data of 203 Dutch firms in the construction, engineering, information technology, and related industries, differences in characteristics between project-based and nonproject-based firms are identified. Project-based firms are distinguished from nonproject-based firms on the basis of organizational configuration, the complexity of the operational process, and the project management capabilities of the firm. Project-based firms also differ with regard to their level of collaboration and their innovation strategy, but not in the level of autonomy. A comparison of 135 innovation projects in 96 of the firms shows that project-based firms do not manage their innovation projects different from other firms. However, the effects of specific management practices on project performance are different, particularly the effects of planning, multidisciplinary teams and heavyweight project leaders. Differences in firm characteristics provide an explanation for the findings. The implication for the innovation management literature is that ¿best¿ practices for innovation management are firm dependent.