In 2000, EU leaders committed to the objective of making Europe ‘the most dynamic and competitive knowledge-based economy in the world, capable of sustainable economic growth, with more and better jobs, greater social cohesion and respect for the environment.’ They drew up the ‘Lisbon agenda’ to achieve this goal by 2010. The central strategy was based on policies to encourage investment in knowledge. Knowledge as a public good with potential spillovers is the rationale behind intellectual property protection and subsidies for investments in innovations that will potentially lead to high spillovers. University research that creates basic knowledge is a leading example of this. But research shows that spillovers are also generated from private firms’ R&D and that firms can therefore benefit from the presence of more innovative and more productive firms. But which universities and which firms are more innovative? And how does globalization influence the answer to these questions? Finally, how can policy influence the innovation process? This project aims at answering these questions, without forgetting their implications in terms of income inequality and volatility, which impacts on the political sustainability of the innovation dynamics.To do this, the first part of the project will focus more specifically on the knowledge sector itself. This second part of the project will look at the ‘bigger picture’, looking at the overall organization of firms in the global knowledge economy, as well as its implications on markets and inequality. The third part will contain a summary and policy recommendations: while the project brings together researchers at the frontier of academic knowledge on these topics, its outcomes will be highly policy-relevant. We plan to end the project with a summary and set of policy conclusions on research and innovation in the global knowledge economy.