As technology becomes more complex, firms rely more on collaboration with other players in their innovation activities. This paper looks at how cooperation with different partners in the innovation process affects a company's performance. I use panel data from the Hungarian Community Innovation Survey, which is linked with administrative firm data. I show that vertical cooperation in the innovation activity has a positive impact on firm performance. Four years after the introduction of an innovation firm value added growth, labor productivity growth, and total factor productivity growth increases as a result of innovation. I estimate that if a firm cooperates vertically in the innovation activity firm value added growth increases by 3.8%, labor productivity growth increases by 3.4%, and total factor productivity growth increases by 2.9% on top of innovation’s direct effect on firm performance. I show that supplier collaboration improves firm performance growth even in the absence of radical innovation. This implies that even firms that introduce only incremental innovations can benefit from collaboration.