This report compares the innovation capacities of WBC based on multiple analytical approaches with a view to understand the possibility of closer regional innovation cooperation. The final aim is to carry out the background report for a common innovation strategy and initiatives for establishing the regional innovation system.

The analyses reveal that WBC differ significantly in overall development and related  innovation capacities  (e.g there is almost a six-fold difference in per-capita income between the richest  and poorest country in the region)  as well as in performance of the national innovation systems (NIS)  and governance abilities to advance innovation competences.

The comparative analysis of the main components of NIS (research sub-system, sub-system for research-driven and non-research driven innovation) distinguishes tentatively three groups of countries in terms of performance of innovation systems. Croatia and Serbia belong to first group which develops a complex innovation systems, yet not fully functional in all parts. Their role and activities will be crucial for the development of regional cooperation within the WB region. B&H and FYR Macedonia and Montenegro form the second group of countries which are lagging behind the leading countries. They are rather familiar with the development of some component of NIS (e.g. research systems) but they are beginners (or moderate) in other components especially those related to science-industry cooperation. The third group of countries are small and geographically isolated economies (Albania and Kosovo UN Res.1244) whose innovation systems are in the beginning phase (Albania) or infancy (Kosovo UN Res.1244).

Despite differences, WBC share many similarities that provide a platform for mutual cooperation and possible development of the regional innovation system. One of the most substantial similarities is a nature of their competitive advantages which refers to non technological sectors and technology efforts that include absorption of foreign technologies and mastery of production capability. Science and research is a residual of their present economic models and not a vital element of development. It calls for policy measures and instruments for strengthening innovation capacities at national and regional level and productive use of research and education. 

The survey-based studies on regional innovation needs reveals that entrepreneurs and researchers recognised two factors as the most important for fostering regional cooperation:

• removing the state and local administrative burdens and procedures for regional cooperation;
• improvement of expert assistance and cooperation with universities ( enhancing the overall quality of science-industry cooperation in the region and strengthening the  interest of both companies and universities for mutual cooperation).

The remaining most important factors are common measures against corruption and regional subsidies and programme for innovation cooperation.