"The promotion of innovation, in particular technological innovation, in developing countries is becoming a fashionable subject. The growing interest in the subject stems from a recognition that it is necessary to go back to basics after experiencing the limits of traditional economic policies encapsulated in the “Washington consensus” approach. This set of privatization, liberalization, and deregulation policies have clearly demonstrated their limits for promoting sustainable growth in the developing world. Similarly, policies focusing on modernization, in the sense of building infrastructure and institutions with a more interventionist government, have not yielded the expected fruits. Thus, there has been a tendency to look into the black box of the engine of economic development, that is technology, its creation and diffusion.

It should be clear that the concept of “innovation” encompasses not only “technological innovation”, i.e. the diffusion of new products and services of a technological nature into the economy, but equally it includes non-technological forms of innovation, such as “organization” innovations. The latter include the introduction of new management or marketing techniques, the adoption of new supply or logistic arrangements, and improved approaches to internal and external communications and positioning. Although this paper will argue for an embedment of technology promotion within broader actions aiming at upgrading enterprises, industries or regions, it will focus on technological innovation.

Policies supporting technology development are known as “innovation policies”. Although governments have a long such practice of promoting innovation by various measures of both a direct and indirect nature, the explicit formulation of innovation policies began about 40 years ago in the 1960s. Since then such policies have been expanded and improved, while new analytical concepts, such as the concept of “national innovation system”, have been elaborated.