Serdal,
You still don't want explicit dummy variables. You have instead indicated
that you need two
factors, one for industryGroup, and one for industry nested within
industryGroup.
The model you suggested
lnQ~lnC+lnM+lnL+lnE+eco_inno+inno+(sum)ind_3d
will be easier to read and interpret as
lnQ ~ industryGroup / industry
Rich
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