Innovation and economic performance at the enterprise level

It is frequently claimed that innovation is essential to economic performance, but such claims are usually quite general and abstract. Often they apply indistinguishably to economic growth generally, to the competitiveness of national economies, to the profitability, survival and growth of individual enterprises, and so on. Clearly, there is need for more precise empirical information that can help us make distinctions as to how innovation relates to economic performance, and this is explored in this paper. We approach this task by looking at relationships between innovation, profitability and growth at the enterprise level, basing our analysis on data on both innovation and performance results for a panel of 640 Norwegian manufacturing enterprises. What are the performance outcomes of innovation? Are innovative firms more profitable than non-innovating firms? Do they grow faster?