The objective of the study is to assess the impact of innovation on the performance of the firm. Innovation is separated into the firm's own innovations, the innovations of other firms in the same sector as the firm (within sector spill overs) and firms in other sectors (across sector spill overs). By considering innovation according to these different sources, the relative importance of spill overs between firms and firm specific innovations can be assessed.
The performance of the firm is defined in a number of ways, work has already been completed relating innovation to export performance, but a wider definition of firm performance will be used in future work, concentrating on the growth of firm productivity (both labour and total factor productivity) and the profitability of the firm. The main policy implication from the study is whether stimulating innovation helps the innovating firm alone, or if it has an impact on other films both within the sector and in other sectors, clearly this has large implications for the effectiveness of subsidies to innovation.