This chapter describes the main actors in the Swedish innovation system, their contribution to the system’s dynamism and the main challenges they face. Businesses and universities are the main innovation actors. Sweden is home to highly innovative, exportoriented, internationalised firms operating at the technological frontier across a wide range of industries. Large firms dominate R&D expenditure in manufacturing industries, while smaller firms make a much larger contribution in the services sector. International comparisons suggest that the Swedish business sector has for the most part done well in the face of important global challenges. Sweden also possesses well-endowed and globally visible universities with a diverse range of strengths. However, universities currently face some long-term challenges. Compared to other world-leading countries there are signs of shortcomings in the impact of scientific research as evidenced in citations and commercial outcomes. In this context, the features of the funding system and of university governance are examined. Finally, human resources for science, technology and innovation are examined, highlighting the measureable decline in education quality.