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The objective of this study is to analyze the determinants of the innovative effort, the production of innovations and their effect on the economic performance of Ecuadorian firms based on a model of four sequential equations that determine the decision to innovate, the innovative effort, the production of knowledge and the effect of the introduction of innovations on the economic performance of Ecuadorian firms. It was found that the determinants of the decision to innovate by Ecuadorian firms are: a) firm size, b) formal protection mechanisms, c) international competitiveness, d) belonging to sectors of high technological and knowledge intensity, and e) government financing. The intensity of R&D activities is determined by: a) capital investments, b) firm size, and c) having an R&D department. Following this, knowledge production is determined by: a) appropriation conditions, b) having an R&D department, c) distribution department, d) industrial sector and innovative orientation