An integral part of the economic transformation is the development of innovations and the improvement of technological capabilities. As a country with a small and open economy, Latvia’s competitive advantages must be based mainly on innovations, technological factors and productivity improvement. The development of innovative activities in all areas and sectors of the national economy is a prerequisite for the transformation of the national economy in favor of the knowledge economy model. The “Latvia’s Productivity Report 2022” (LPZ2022) recognizes that the only way to support economic growth is to seriously focus on innovations and investments in competitive innovative projects, raising both state and company funding.

According to the regulations of the Cabinet of Ministers of September 22, 2020 No. 588 “Regulations of the Ministry of Economics”, the Ministry of Economics is the leading state administrative institution in the field of industry and service policy, business policy and tourism policy, whose functions and competence include the development and organization of innovation development policy and coordination.

The main national priorities, directions of action and activity-level measures aimed at developing industry, promoting access to finance, innovation and export, as well as improving the business environment, are included in the guidelines of the National Industrial Policy for 2021-2027 (NIP2027) (approved by the Cabinet of Ministers of 2021 Order No. 93 of February 16 “On the Guidelines for the Development of the National Industrial Policy for 2021-2027”). In the framework of Latvia’s National Industrial Policy, INNOVATION and increasing innovation capacity is one of the main directions to improve the competitiveness of Latvian industrial sectors and increase productivity and export volumes. The guidelines set out 12 tasks for the development of Latvia’s innovation system, including promoting private and public sector investments in research, development and innovation, promoting the innovation ecosystem of the country’s large companies, ensuring the creation of a legal framework for the establishment of pilot territories, i.e. innovation zones, etc.

At the same time, the goals and directions of action of the innovation policy are also determined in the Science, Technology Development and Innovation Guidelines for 2021-2027 (approved by the Cabinet of Ministers of 2021 Order No. 246 of April 14 “Regarding Guidelines for Science, Technology Development, and Innovation 2021-2027”).