Inside the 'Black-Box of Innovation': Translating R&D outlays into economic and employment growth

The purpose of this study is to cast light on the complexity of innovation by describing Regional Innovation Systems (RIS) architecture and by reducing the uncertainty that surrounds Governmental R&D Investment effectiveness. Empirical evidence demonstrates that the RIS subsystems are not homogenous, and most have negative side-effects. Our results suggest that the 'quality' of economic agents cannot be successfully replaced by 'Keynesian policies' focused on enhancing Market Potential, Demand Sophistication and Governmental R&D Investment. Investing in developing Absorptive Capacity is the most balanced and short-term development strategy for regions averse to innovation and characterised by low industrialization and income levels.