The chart above comes from our recent survey of economics bloggers. For me, the results showed what I hope but were disappointing in that every source of innovation that we listed got a "Gentleman's B" or higher.
The good news is that all of our policymakers think innovation is a good thing, growth is a good thing, and so on. The bad news is they still act on that instinct with classic "spend more" solutions. Innovation is not a rope that can be pushed. If it was, then funding more R&D would make sense. But in isolation, R&D spending won't get an economy very far.
Our panel of experts believes that the most important source of innovation is the "small start-up firm" which is in contrast to the venture-financed firms. In all fairness, the panel did not rate users, tinkerers, and garage entrepreneurs very highly either. That viewpoint is epitomized by the excellent research from Eric Von Hippel, and my guess is that still not enough people are familiar with it. Here's a quote from his 2005 book (which is freely available as a PDF at the link above):
The manufacturer-centric model does fit some fields and conditions. However, a growing body of empirical work shows that users are the first to develop many and perhaps most new industrial and consumer products. Further, the contribution of users is growing steadily larger as a result of continuing advances in computer and communications capabilities.