This paper examines the effect of the German co-determination law of 1976 (MitbestG) on the innovative activity of German firms. Co-determination applies to firms with 2,000 employees or more. Data from 1971–1976 and 1981–1990 on 148 firms are used to compare the number of patents granted to co-determined firms before and after the introduction of the law. Several control variables are applied and in particular, in order to avoid a possible bias from specific effects of firm size, we compare the co-determined firms with others before and after 1976. The results do not support the view that co-determination slows down technological progress and reduces innovativity.