Purpose: the study aims to analyze industrial development in the Udmurtia and propose measures to foster innovation. These efforts may enhance regional manufacturers' order portfolio and enhance the region's competitiveness both nationally and internationally.Methods: the research employs a complex of methods including factual, dynamic, causal, correlation-regression and structural analysis, alongside generalization, comparison, logical analysis, and graphical visualization.Results: the article analyzes the development of the industry in the Udmurtia, known for its strong presence in the military-industrial complex (MIC). The study delves into current industry trends, innovation indicators, and practices of MIC enterprises. It highlights obstacles to innovation and suggests measures to boost innovation, increase output volumes, and bolster the industry's adaptability to emerging challenges.Conclusions and Relevance: the regional enterprises of the manufacturing industry and MIC are the leading producers of innovation in the region. However, the proportion of innovative industrial products in the overall regional output is limited to 10%. Correlation and regression analysis showed the significance of the level of innovative activity of organizations and the share of organizations carrying out technological innovations in the effectiveness of innovative activity in the manufacturing industry. Innovation can be encouraged through various means, such as attracting investments, establishing a regional Agency for Innovation Development, digital platformization, and fostering integration among innovation entities with the help of an innovation accelerator, taking advantage of new market niche opportunities, stimulated by promoting corporate entrepreneurship. The region’s future prospects are closely tied to the development of the high-tech sector of unmanned aerial systems, what is the subject of scientific interest of the author's future research.