Increased competitive pressure from low-cost economies and substituting materials has raised the need for new strategies focusing on product differentiation in the Nordic wood industry. With the aim to identify factors that can facilitate increased product innovation activity, this study compared organizational characteristics and perceived barriers to product development among innovating and non-innovating strategic business units (SBUs) in the Swedish and Finnish wood industry. Multivariate analysis of data from a cross-sectional sample of 110 SBUs suggested that organizational size and educational level among white-collar workers are significant antecedents of product innovation activity. Furthermore, the difficulty of giving practical priority to development work in the everyday stress was identified as the most important perceived barrier to product development among managers in both innovating and non-innovating SBUs. A low competence level among the personnel and a low need to innovate was perceived to be the second most important barriers to product development among managers in, respectively, innovating and non-innovating SBUs. Practitioners who wish to increase product innovation activity in the wood industry are advised to promote an increased educational level in wood industry companies. They are further encouraged to seek ways to reduce the perceived barriers to product innovation identified in this study.