Following the Crépon-Duguet-Mairesse Model (1998), using a database with 2,078 Mexican manufacturing establishments from 2004 to 2006, adapting available proxy variables and proposing a different productivity estimation, this article sets out: Which is their innovation propensity? Which factors push on their innovation efforts? Are these efforts and the innovation favoring labor productivity? The main findings are: Mexican manufacturing establishments with a higher innovation propensity are the largest, with high technological intensity and market share. Advertising, knowledge appropriability, FDI, TT and access to credit have a positive effect on innovation efforts. Moreover, the innovation effort, together with export levels, FDI and access to technology have influenced the innovation of new processes and/or designs, particularly in local firms as compared to foreign firms. Finally, the variables: innovation, labour remunerations and capital intensity have a substantial effect on labor productivity and at a lower level market share, FDI and total quality control.