The process of firms’ growth – in terms of productivity or employment – is a major concern of policy makers. In this context, innovations are considered to play a crucial role in stimulating firms’ performance. This book investigates this general hypothesis by looking at three topics: 1. Does innovation lead to an increase in employment growth? 2. Does innovation boost labour productivity? 3. Does innovation in one period improve innovation performance in subsequent periods? Based on a comprehensive innovation panel dataset for German firms, this book presents detailed results for each question, in particular by separating the effects induced by new products from those induced by the introduction of new production technologies. From a theoretical point of view, amongst others, a new multi-product model has been developed to study employment effects.