How can innovation best be promoted? Based on a major interdisciplinary research program with a special focus on Sweden, paired with international research, this book shows that targeted interventions and firm subsidies do not have the intended effects but instead creates policy failures, government waste and rent-seeking. Instead, innovation policy should focus on supplying the right competencies and on improving the institutions of the market economy and the general conditions for enterprise. Markets rather than bureaucrats are decisive for innovation, industrial development and growth.