Do Innovating Firms Outperform Non‐Innovators?*

This paper tracks the experience of a number of innovative and non‐innovative large, quoted UK firms, looking for differences in performance associated with the production of major new innovations. Innovating firms are both more profitable and grow faster than non‐innovators, but the major difference in performance turns out to be cyclical: innovators profits and growth are much less cyclically sensitive than non‐innovators.