In this paper we address the estimation of Euler equations for labour and capi- tal inputs, using an adjustment cost schedule which allows for interactions between capital and labour and for asyrnmetries between positive and negativ'e adjustments. F'urthermore, we allow factors' productivity to depend on the innovation activity underta,ken by the firm. Our results, based on a sample of Spanish manufacturing firms for the period 1991-1995, can be summarized as follows. We find evidence of p-substitutability between capital and labour. Rirthermore, we find a positive effect of innovative activity on labour productivity.