One of the main drivers of productivity growth, both in Croatia and in EU countries, is through innovation and new technologies. The reason lies in the fact that economies whose innovation is at the highest level have the characteristic of achieving a very high level of competitiveness, and nowadays the concept of innovation is considered the main support for the socio - economic development of national economies. Increasing the capacity focused on research, development and innovation, in all sectors of the economy, all together with strengthening the efficiency of resource use, leads to faster growth of competitiveness in the market and much easier job creation. The main goal of all companies that introduce innovations should be to improve performance and accordingly the company will become more competitive in the market compared to companies that are not innovative. When we talk about innovation activities, we can say that they bring a lot of investment and bring great risks, which ultimately affects the overall business of the company. By unjustified investment in innovation, a company can increase its liabilities, and on the other hand if the application of innovation does not give the expected results there is a significant deterioration of financial indicators, which ultimately puts companies in a position to survive or not. In a broader sense, the term innovation refers to new products and services and new technologies, emerging production processes, new marketing methods and ultimately new management models. Research and development as the backbone of the development of successful company innovations is a source of competitive advantage in the domestic and foreign markets. Regardless of the achieved competitive advantage based on investment in research and development, it is still necessary to continue investing and improving products and services and strive for even better improvement in order to maintain this advantage. This paper will cover the definition of innovation, the importance of investing in innovation, research and development in terms of economic growth, but also state support through various programs through which innovative and research and development projects are co - financed.