This report provides a starting point for appliance energy efficiency policy to be informed by an understanding of: the baseline rate and direction of technological change of product industries; the factors that underlie the outcomes of innovation in these industries; and the ways the innovation system might respond to any given intervention. The report provides an overview of the dynamics of energy efficiency policy and innovation in the appliance industry, introduces the competitive framework of this industry (which includes an important role for government), defines and discusses the processes and outcomes of innovation in this context, and frames the dilemmas facing energy efficiency policy-makers when considering innovation. The report also provides details of research design and first-order results of a pilot study to empirically and systematically assess the inputs, outputs, and conduct of innovation involved in a case appliance (refrigerators). The results, which have been analyzed at a first-order, speak to the high concentration of the industry, the stability of the market positions of leading firms in the industry, the similarity between the market share and intellectual property positions of the leading firms, the growing importance of R&D in the appliance industry and in refrigerator development (although there is an indication that the industry lags the best practices of comparable industries and firms of similar size), the gradual decline of innovation focus on the energy aspects of refrigerators, and the diversity of the leading firms with respect to their capability to assimilate knowledge. The pilot study itself is novel in attempting to build an initial bridge between long-standing concepts in the innovation literature, such as the resource-based-view of the firm, dynamic capabilities, absorptive capacity, etc., and issues in the energy efficiency policy arena.