How do firms differ, and why do they differ even within narrowly defined industries? With evidence from six high-tech, manufacturing industries covering a period of 24 years, we show that differences in sales, materials, labor costs and capital across firms can largely be summarized by a single, firm-specific, dynamic factor, which we label efficiency in light of a structural model. The structural model suggests that this measure is tightly linked to profitability and sales, but unrelated to labor productivity. Our second task is to understand the origin and evolution of the differences in efficiency. Among firms born within the 24 years period we consider, intrinsic (time-invariant) efficiency differences dominate differences generated by firm-specific, cumulated innovations.