Background: The needs of the consumers seem to develop at the same rate as the technology advancements and put more pressure on firms to produce new and innovative products at a faster pace. Research has shown that external sources can have a significant effect on the firms’ innovation performance, but the results are partial contradicting and more research is needed. Purpose: Investigate customer and supplier involvement in product innovation in Swedish manufacturing firms. Delimitations: The study was carried out to manufacturing firms in Sweden, as Swedish firms are the most innovative in Europe at this point in time. Only large and medium sized firms were under investigation as larger firms are more eager to innovate than smaller firms. Method: The research had a deductive quantitative approach. The data was collected through a questionnaire sent out by e-mail and 124 firms participated in the study. After assessing validity and reliability, the hypotheses were tested by multiple and single regression analysis. Conclusions: Firms that strives to improve their new product development process should seize their customer’s knowledge and use it to co-develop new products. Another important factor was to use lead users, as these will improve the innovativeness even more than “ordinary” customers. The study found no support for early supplier integration in the new product development process.