Twenty years after EU enlargement, the economies of Central and South Eastern Europe have become important components of Europe's industrial production system. The countries of the region are now faced with the task of taking a step towards a more sustainable and productive growth model. This step can only succeed if the countries succeed in becoming innovating economies with national companies that are strong in research, development and innovation. To succeed, the countries have to develop not only strong industrial policies, but also policies aiming at creating solid national innovation systems. This new study by Friedrich Ebert Foundation describes how this can be achieved. It analyses the region's potential and uses the examples of Ireland and Singapore to describe successful innovation strategies. The study contains detailed country chapters in which the conditions and potentials for innovation-driven growth are analyzed for all EU member states in Central and South Eastern Europe. The study is authored by a team from the Vienna Institute for International Economic Studies. It is part of a series of FES studies on the growth model in EU-CEE and its prospects which have been published in recent years.