ABSTRACT
This chapter aims at discussing theoretical foundations for explaining the innovation divide between countries and its changes over time, i.e. convergence or divergence in innovation capacity. It also identifies determinants of innovativeness at the national level in order to figure out how countries can initiate and speed up the process of innovation capacity convergence. This analysis supports the conclusion that the most important internal factors that determine innovative capacity and can drive its convergence towards innovation leaders are R&D expenditure and its structure, human resources for research and development activities as well as innovation policy incentives. The key external factors include foreign trade, in particular high-tech exports and imports, foreign direct investment and international mobility of R&D personnel.
