Latvia was ranked 30th out of the 32 countries included in the EIS Summary Innovation Index. Recent economic trends and market developments shape the current opportunities and threats for further R&D spending and development of innovation policy in Latvia, especially, under the tight budget that requires strategic prioritisation of actions and funding allocations. The purpose of government is to investigate the link between innovations and overall country performance Based on the preceding analysis a range of possible future policy actions can be used. Expenditure on R&D is found to be highly significant and positive. The higher level of the country where innovators are able to control the returns of their discovery, the value of the innovations (measured by R&D spending) is higher for innovations. Expenditure on R&D is found to be highly significant and positive. Main opportunity for Latvia lies in using existing industrial infrastructure and taking maximum advantage of it. It is highly important to maintain long-term policy of established and well-functioning schemes and policy lines, a systemic approach as well as a strategic long-term vision in terms of policy planning. Some tax incentives (e.g. innovative tax like in Estonia) as a non-financial instrument for the promotion of innovation, so far unused in Latvia, are still to be taken advantage of. In the light of managing the economic crisis the action plans being drafted by the government may prioritise specific industrial branches producing exportable goods and services but also they at the same time need to ensure innovative activities thereby ensuring overall country performance and competitiveness in the long term.