This paper analyses the impact of sectorial and territorial factors on the dynamics of employment in regional industries in Spain over the period 1980-2006. A dynamic panel data model is estimated using panel data techniques (System-GMM), which provide an alternative methodology for addressing the problem of variable endogeneity. The results confirm the robustness of the contemporary effects: diversification, market size and dynamics in the sector affect employment in the short term. However, effects in the long term are more uncertain.