Designing and implementing local development strategies is of critical importance if prosperity and living standards are to be raised. They are the means by which localities can respond to the challenges presented by globalisation and seize new opportunities as they occur. Yet this is a much more difficult exercise than is sometimes thought. The challenges are even more acute in Central and Eastern Europe, with its ongoing ambitious reforms, profound economic restructuring and extensive learning phase. The success of local development strategies in the region depends on the ability of governments and their partners to accelerate change in both the policy and governance aspects of economic and social development. These include wide-ranging issues such as enhancing flexibility in the management of policies and programmes, establishing a consistent overarching strategic framework for local development, reviewing local government finance and setting up mechanisms to raise capacities. There is much government can do to influence the development of local innovations for growth in Central and Eastern Europe and enhance their impact on the economy and society.