The aim of this book is to analyze the relationship between innovation, employment and competence development within the framework of new learning organization forms. Knowledge production and innovation are often seen as linear processes, assuming that scientific results are followed by technological invention, production and market introduction. An alternative approach, which is chosen in this book, is the interactive and learning approach to innovation. Here, product innovations are considered expressions of learning processes taking place inside firms and involving different functional groups and various decision levels, as well as relations with the firm’s customers and subcontractors. A theoretical framework is constructed which combines the system of innovation approach and the system of employment approach. This framework is applied in a dynamic empirical study of enterprises in the private urban sector in Denmark. The empirical study utilizes a unique longitudinal data set. The data set combines two large surveys and detailed register data on 524 Danish firms, and it includes infor- mation on the behavior of the firms and all employees employed in each of the 524 firms for shorter or longer tenures in the period 1990 to 2000. The book is primarily addressed to researchers, policy makers and students of innovation, organization and employment, but I sincerely hope that it will also find its way to real life actors: business leaders, employee representatives etc. The author is an associate professor in quantitative methods and study leader of Master of Labor Market Relations and Human Resources Management at Aalborg University. He has long experience in empirical research. He has been a member of the DISKO research group since the start and project manager on the National Centre for Labour Market Research (CARMA) at Aalborg University.