This study investigates the determinants of labour productivity growth of Swiss fi rms in the period 1994–2002 particularly emphasizing the role of innovation activities. Thus, the main research question pursued is: to what extent do different types of fi rm-level innovations affect labour productivity of fi rms in Switzerland? This is a question of particular interest for Swiss policy-makers in the light of the unsatisfactory growth performance of the Swiss economy in the 1990s (see Federal Department for Economic Affairs 2002). Most observers consider the low growth of labour productivity as the main single factor for explaining this unfavourable performance as measured by GDP growth. Labour productivity depends on physical and human capital as main production factors as well as on new knowledge and innovation. Economies that develop more and more in the direction of a “knowledge-based economy” are relying increasingly on technological innovation. Hence, it is important to gain some insights with respect to the (quantitative) relationship between innovation and economic performance. A better understanding of the relative importance of the factors determining productivity growth could contribute to an explanation of the low productivity growth of the Swiss economy in the 1990s.