In this paper we examine the effect of innovation on job creation and jobdestruction in Spanish manufacturing. Our empirical analysis is based onfirm-level longitudinal data from which we have information on employmentand innovation activity. The estimation approach consists of a two-stepprocedure that takes into account the fact that firms endogenously choosepositive, negative or zero growth in employment, in which the selectionmechanism is an ordered probit. Our results point out the importance ofinnovation variables on employment growth: innovative firms create more jobs-and destroy fewer- than non-innovative, and the degree of technologicaleffort has a strong positive effect on net employment creation.