Innovation, considering the process of accumulation of intangible capital in a society, contributes with 20 to 30% to productivity growth in developed economies. Several European countries, including Portugal, have made a large effort in increasing its effort of State R&D. However, not only it only represents about 12% of the innovation effort, but its efficiency has been low. There is a need to increase the capability of the universities and large state laboratories to link with enterprises and increase the rate of patenting and creation of better products and markets and improve organizations. Based on an extensive array of best-practices around the world, the paper identifies a large spectrum of policies required to modernize universities, revitalize state laboratories and mainly launch a set of initiatives to increase innovation at enterprise level. This comprises building a decentralized network of design and technological centers closely linked to industry and services clusters, revitalizing cities and technological parks with incubators and financing of venture capital and start-ups. We identify a major role for multinationals in the process of upgrading to high-tech exports and inserting the country into the value-chains of global trade and ideas.Innovation Policies