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The purpose of the current paper is to analyze the impact of regional potentials on the process of growth. How are different types of regions (e.g. medium sized [city] regions, rural regions, urban regions or metropolitan and high-tech cluster regions) affected by improved performance, and to what extent can differences be explained by ex-ante difference in income? Based on data from the regional innovation scoreboard (RIS) is this issue addressed relative to the income level, previous growth performance and convergence. In the first part of the paper, the innovation performance of the regions is modelled relative to the income level and the underlying influencing factors are identified. Hereby, we are able to identify strengthens and weaknesses of the innovation structure in different regions. In addition the issues of returns to scale will be considered. In the second part of the paper the innovation performance is related to the process of convergence and divergence. Earlier research has shown that although convergence is present at aggregated European Union level a much more diversified picture is revealed at the disaggregated level. Here it is frequently observed that the more wealthy and central regions move away from the other regions. One of the results is that the economic crisis has reinforced not only intraregional divergence within countries but also the traditional divide between the stronger Northwest European countries and the South and East of Europe. Finally, the paper discusses and evaluates the impact of different types of innovation performance and the level of income on the perspectives of economic growth for different types of regions. A number of scenarios a sketched for the perspectives of the regions depending on endogenous as well as external factor endowment and dynamics.

A recent study for the Danish government has identified innovation as one of the major drivers of regional competitiveness in Denmark. Innovation and the capacity to innovate are crucial factors in the development of a firm and its ability to adapt to changes in the external environment. In particular changes in the international production system with increasing out-sourcing of physical production from Western Europe has highlighted the need for an alternative economic base in many regions. As a consequence, attention has been on the role of innovation policy in economic policy in general and regional development in particular. The aim of this paper is to analyze the interaction between the actors in the innovative environment (i.e. the firm, advisory and research institution) and the external environment as a part of a broader network of innovative relations covering intra-firm as well as extra-firm relations and processes. The project covers the following aspects: • In the first part of the paper concepts and policies of innovation are discussed with regard to their ability to move the economy toward higher growth. • The second section provides a brief overview of regional convergence and disparities in Denmark in the last decade, and compares with the trends in a broader European perspective. • The next section summarizes the findings of a recent study of the regional system of innovation in Western Denmark, and provides a critical review of the role of innovation in the process of economic restructuring in the perspective of growing internationalization in many branches. Based on this assessment the future perspectives of regional policy in Denmark are discussed on the background of the ongoing reorganization of local and regional government in general, and the introduction of five regional growth-forums in particular.