How can the government support the Enhancement of Innovation-based capabilities in large firms?

The aim of this paper is to describe the governmental intervention points in order to encourage Iranian large firms to pursue catch up process through innovation. Large firms play a significant role in economic development. The growth rate of these companies depends on their innovation capabilities. It is difficult for governments to deal with capability development within a firm, they should therefore provide appropriate incentives and opportunities to indirectly promote it. For this purpose, a conceptual framework is developed and presented. By interviewing top managers of large companies and experts from Steel, Pharmaceutical, Power Generation and Car industries of Iran, the proposed framework is enhanced and supported. Although, policies are normally contextual and may differ from one to another industry; some horizontal policies which are common among different industries are revealed and clustered by employing thematic analysis. According to this investigation, provoking the demand side, balancing the bargaining power, financially supporting R&D and innovation activities, trying to remove or reduce the effect of international sanctions and helping the companies to improve their design, implementation and commercialization capabilities are the five major elements which should be considered by the Iranian government.