This book contains a theoretical and empirical analysis of the sources of technological change and economic growth.The first part takes an aggregate view at the growth process. Scale economies and knowledge spillovers are analysed with a broad panel of sectoral data for Germany and the United States.The second part contains a micro analysis of endogenous innovations and knowledge spillovers. The determinants of innovations are analysed and the effects of innovations on productivity and market behaviour are discussed. The models are estimated with a broad panel of firm level data from the ifo firm panel.