The development of the Italian space industry is the result of the reciprocal interaction between firms and supporting institutions of research. This thesis investigates how a renewed innovation policy overcame the constraints imposed by the disappearing of the entrepreneurial state and allowed the rise of a high technology industry in Italy during the last 30 years. The creation of the Italian Space Agency (ASI) has then created the incentives to merge the main firms of the industry into a new company, Alenia Spazio, based on the heritage of the former State-owned holding from which it collected capabilities and technologies. Despite a promising start, innovation in the industry was poor and affected by the changing economic environment of the Nineties that caused a difficult process of internationalization and limited the efforts of ASI.