The way innovation systems are defined has major implications for the balance and mix of policies needed to improve innovation system performance and for the amount of communication and co-ordination required to create holistic innovation policies. To the extent that countries operate within the confines of a narrow “innovation system map” focused on science and technology and the formal R&D system, they are likely to be guided into making policy choices that optimise the formal part of the system at the expense of the whole. However, over the last decade or so, a broader perspective on innovation systems has emerged, which increasingly underpins attempts by governments to develop more holistic innovation and research policies.

With this broader perspective in mind, this chapter provides an overall assessment of the innovation and research activities of the business sector, the public science and education systems, and the stock and flow of human resources. It begins with the central actors in any well-functioning innovation system – business firms – and further explores explanations for low levels of R&D spending but also broadens the perspective on firm innovation by taking into account non-R&D and non-technological innovation. The chapter then considers the public-sector research system, starting with the public research centres (PRCs). This is followed by an exploration of Mexican higher education institutions, which perform the largest share of publicly funded R&D in Mexico and are responsible for tertiary education. A final section covers the human resource dimension of innovation.