Innovation and Local Development are considered as two notions which are closely related to each other. A key to prosperity in local environments is increasing productivity. The growth of productivity is the basis for increasing salaries of employees, increasing profits for local businesses, and ultimately increasing the domestic product of a region. Innovation is a place based and a social process that involves local business resources which is presented mostly by micro companies as the motor of economic development and the main innovative asset of communities. In this context EU policy is focused on providing a favourable environment for those local resources (SMEs and people) to invest in competitiveness and innovations for achieving sustainability.

Even though innovation policy and development is regulated by innovation platforms on national level the main motor of innovative activities is at regional level.

Inputs and assets of the innovation environment

Economic factors:

• Legal and regulatory environment
• Financial capital
• Competitive markets

Cultural inputs:

• Openness to innovation
• Entrepreneurial spirit
• Consumer demands

Knowledge/qualification inputs:

• Qualified and mobile human resources
• Life long learning
• Science and technology