In April 2010, Malaysia embarked on a new economic model (NEM) to transform the economy towards High-Income status by 2020. Knowledge and innovation are the bedrock of this development strategy. Indeed, moving to High-Income status would require economic growth in Malaysia to be sustained by higher productivity growth, which in turn relies heavily on knowledge, innovation, and efficient allocation of resources. Yet, it is not clear from policy discussions in Malaysia, that the mechanisms through which innovation penetrates a society and ultimately drives economic growth are widely understood.Fostering innovation, beyond the traditional fixation on R&D and funding, requires making the right trade-offs in the allocation of resources and creating an overall environment and culture that enable the emergence, nurturing, implementation and fruition of ideas. This calls for bold societal reforms that are cross-cutting in nature, along the lines, but well beyond, the eight Strategic Reform Initiatives (SRIs) suggested in the NEM.This book offers a timely and comprehensive assessment of the innovation capacity of Malaysia, rigorously gauging the readiness of the country in transforming into a human capital-centric, innovation-led economy. Drawing on a series of empirical tools and methodologies, as well as the “Malaysia Vision 2020 Model” (MV20 model) developed in Khazanah Research and Investment Strategy (KRIS), the book adopts a holistic, integrated approach to evaluating the spheres of the Malaysian economic system that are critical to unleashing the innovation potential. These include the education sector, the labour market, the product market and the knowledge production sector, as well as the functioning of public institutions. In each of these spheres, the book articulates what it will take for Malaysia to achieve its Vision 2020.