Catching up toward higher living standards will depend crucially on the Chilean economy becoming more innovative and productive. However, business R&D intensity has been low in the past and innovation has suffered from a variety of bottlenecks, including a shortage of qualified STEM graduates. Policy settings have become more supportive of innovation recently, with reforms encouraging firms to invest in R&D assets and to access financing. Chilean firms have become more innovative, including in traditional sectors centred on comparative advantages and natural resources. Start-up Chile has attracted international attention as a way to foster entrepreneurship, and entry barriers to open a business have been reduced. The underused R&D tax credit has been made easier to claim, with its take-up now increasing. Still, there is scope to further develop the innovation system, improve existing programmes and strengthen institutional coherence.