The by-product of the current global economic processes is increasing competitive pressure. In conditions of world economy globalization, the Czech Republic was particularly successful in the 1990s, mainly due to the strategy of “low cost economy”. Low costs were the primary source of competitive advantage. Increasing pressure of large countries with cheap labour force does not allow the Czech Republic make its labour costs lower and use this as a source of economic growth and international competitiveness. Therefore the Czech Republic was forced to direct its further economic development towards the knowledgebased economy. Due to this new priority, in the economic policy the innovative abilities of the companies, increasing quality of human resources, as well as research and development of the new technologies became the most important tasks. For the most of companies these trends were tantamount with the necessity of basic changes in production process organization, management, human resources development, etc. Both inner and outer entrepreneurial environments were thus considerably changed and innovative companies become the carriers of comparative advantages in the regional development. The objective of the article is to assess the current position of the Czech Republic in international perspective as far as the innovative efficiency is concerned. The authors also will try to point the strong and weak sides of the innovation system in the Czech Republic. The second part of the paper analyses the innovative potential of particular Czech regions.