It is widely agreed that technological learning and innovation are essential features of successful economic development. Yet achieving commercial success through technological innovation is notoriously difficult. Sophisticated entrepreneurial, managerial and organisational capabilities are at least as important as technical capabilities for achieving and sustaining this. Policy decisions around innovation expenditure should emphasise commercial not technical success. Expenditure should not only assist the development of new technologies, products and processes but also consider the development of managerial capabilities for penetrating large, difficult to enter overseas markets. This is a particular challenge in the manufacturing sector where innovation has traditionally been inwardly focused. Overcoming this is extremely important as this sector holds the key to broad-based job creation.