Innovation is the main driver of international competitiveness. According to the European Innovation Scoreboard Latvia has innovation performance well below the EU average. Three dimensions of innovation are included in the EIS: innovation enabler, firm activities and innovation outputs. In order to maintain national development and to improve international competitiveness, the system of innovations in Latvia should be improved. The schema of innovation supporting structures will be worked out. It will be useful for public and private sector as well. Innovations, creativity and productivity positively affect competitiveness, sales volumes of companies and gains. It also tends to increase people’s income and life satisfaction. Innovations are connected with synergy. Innovations are like innovative push which changes the qualities of the system. Innovations are very important in the vulnerable sectors of national economy. Regions specialized in vulnerable sectors have been able to move up the value chain to higher value-added activities. Innovations incur usually in workplaces, in research centers and in the high education establishments. Tertiary educated people and formation of searching society can increase innovations and productivity. It primarily depends on the capability of the education system to produce the required specialists of various fields. Unfortunately the funding by the state budget to higher education in Latvia is low in proportion of the GDP. Therefore it is essential to activate the channels that encourage investments of the private sector into research and development, as only in such conditions the spending for research and development provides an adequate innovation process in the national economy.