During the last ten years, the 'systems of innovation' approach has developed into a useful tool for studying, explaining and, to some extent, even for influencing innovation activities and technological change. This approach shares with other theories the assumption that innovation is an important factor that stimulates economic growth but that has developed into a more complex model. A system ... [Show full abstract] of innovation brings together all the major factors that affect technological progress (Edquist 1997) and tries to form a systemic model of these factors. Such an exclusive focus on technological change and economic growth, however, is not enough to tackle the current socio-economic problems, as innovation does not represent a positive sum game (Boden and Miles 2001). While the system approach has mainly dealt with determinants of knowledge creation and knowledge diffusion, it has hardly paid attention to socio-economic consequences resulting from the diffusion of innovation. As a focus on the creation of a knowledge stock and its diffusion is too narrow and not sustainable, we have to study feedback on radical product and process innovations more carefully (Lundvall and Archibugi 2001). Taking into account that the innovation system is part of the economy and the wider society and as such impacts on other natural, social and technical systems, such as the labour market or the ecological system, feedback becomes an important aspect of innovation processes. It might be the case that an increasing innovation capability of a territory only creates short-term advantages but actually undermines its capability to produce long-term economic growth. This is the case when the costs of dealing with social and ecological problems as unintended consequences of technical development become bigger than the benefits resulting from innovation and change. Moreover, it is through feedback that the innovation system shapes the framework conditions for its own functioning (Cooke and Schienstock 2000).