ositive relationship with firm growth in the software industry. However, this positive relationship could be found only in the cases where firms had accomplished both technological and nontechnological innovations. Hence, pure technological innovations alone or R&D activities alone did not seem to increase firm growth. Effect of Software on CSP Performance Oleksiy Mazhelis, Pasi Tyrväinen, and Kimmo Suojapelto In order to verify how (if at all) CSP's investments in software affect their business performance, the relationship between (i) CSP's spending on software and (ii) its key performance indicators (KPIs) is considered below. The invest- ments in software are represented by internal, external, and total software spending a year or two years prior to the KPI values, while the KPIs include average revenue per user (ARPU), revenue, net income, EBIDTA, and change in revenue (as an indicator of company growth). Besides, Opex and Capex along with R&D expenses are used as control variables. We use the data collected for the years 2004-2007 (revenue, net income, EBITDA, market capitalization, R&D, CAPEX, OPEX), and 2004-2006 (ARPU). The data is used to construct regression models wherein the dependencies between KPIs and software spending are evaluated in terms of the variance explained by each of the independent (or control) variables. The dependency of CSP's KPIs on software spending, and Opex, Capex, and R&D expenses are summarized in Fig. 1. The thickness of arrow lines indicates the magnitude of the variance explained (thick line indicates the coefficient of deter- mination of R2>0.5, thin line - 0.1 1R2 <0.5, and dotted line - 0.05<R2<0.1. The type of the arrows designates the sign of the regression coefficient: the double (single) line corresponds to the positive (negative) value of the coefficient. As suggested by the figure, the CSP's spending on internal software develop- ment may cause a reduction in the revenue. This can be explained by the fact that, being in the productization phase, the OSS/BSS softwar