The main goal of the study is to describe the process of innovation management and its effects on innovations in the Finnish forest industry. The target is to produce new information about the present state of the industry's innovation activity, innovation management practises and its most significant factors. The findings are analysed with the development of innovation activity in mind. The management process, the related actions as well as the factors affecting this process, are all studied using company interviews. In addition, the characteristics of the innovation activity in the forest industry, which affect to the goals and actions of innovation management, are described. The development time of commercialised innovations and the significance of different collaboration partners are considered as effects of innovation management, and studied using the SIN-model (System Integration and Networking). The Sfinno, innovation database, created by VTT's Innovation and Industrial Renewal -research team, is used to study individual innovations and the related information. Companies were found to have started to develop their innovation activity. Still, a controlled innovation process, clear strategic courses and actions for managing the process are largely missing. This disorganisation is affected by the contradictory targets for different time periods: in the short term, companies strive for cost efficiency and in long term they reach for renewal. Cost efficiency has also been the driving force to generate new innovations which typically have been incremental process innovations. Companies have also commercialised product innovations aside from production development. Some new products can be seen as having shifted towards more radical innovation by their nature. It became evident that the most important partners in collaboration are customers, subcontractors and suppliers. Especially the role of customers in the entire innovation process - from market intelligence to commercialisation - is significant. When it comes to the development times of innovations, it was recognized that these had decreased continuously during the 90's. The most influential factor of collaboration to this depletion is domestic customers. In the future, networking, efficient innovation process and the capability to produce successful innovations will be the key success factors. In addition, innovation management has to concentrate on supporting sources of innovation and more radical innovation, and reducing resistance to innovation. The companies in the forest industry should find a way to produce, not only product innovations, but more radical product-service -concepts. These will have a greater effect to more extensive technological improvement also in processes and will ultimately lead to more sustainable competitiveness.