This thesis deals with innovation in the agricultural sector in Albania by looking at it primary from a company level perspective, but in correlation with the environmental settings and sector situation. This thesis looks at the challenge of further development of this sector form the innovation and entrepreneurship spectrum and it recognizes three main objectives. The first objective is to investigate the factors of innovation and how innovation happens in the agriculture sector in Albania by focusing in its core unit the agriculture businesses. Drawing a sector pattern of innovation management with respect to theoretical background on innovation factors within a company goes hand in hand with the situational analysis and business environment of the agriculture sector. Therefore the second objective is a deeper understanding of the actual situation of the sector through a) a detailed investigation of competitiveness related economic facts such as domestic production vs. domestic demand, yields of specific crops, turnover, trade flows etc. with the aim of insight on competitiveness characteristics by subsectors; b) investigation of environmental settings of the sector with respect to innovation through the loop of innovation systems theory. The third objective is to integrate findings at a company level and from the situational analysis of the sector with respect to competitiveness and environmental settings, in broad recommendations on how to better enable innovation and development in this sector by addressing weak points at a micro and macro perspective. The core theory I am relying on is the systemic perspective to innovation within a company, introduced form Prof. Franke in the Innovation Management Module, which presented a set of important dimensions with respect to innovation such as top management/entrepreneurs leadership and his role as a promoter of innovation, organization culture, marketing and organization processes as enhancers of innovation within a company. The extent of integration of company dimensions such as innovation marketing, sources of innovation, innovation climate, and processes of innovation will provide the mix of innovation factors that can be identified as a pattern for the sector. To link this with the bigger frame I rely on the concept of national innovation systems. Innovation Systems are treated often from recent research as a promising yet difficult to implement concept for the further development of agriculture, also in developing countries. The innovation systems literature represents a significant change from conventional linear approach to research and development by providing an analytical framework that explores complex relationships among heterogeneous agents, social and economic institutions and endogenously determined technological and institutional opportunities. This shift in perspective is appropriate for the study of developing country agriculture because it captures the intricate relationships between diverse actors, processes of institutional learning and change, market and non market institutions, public policy, poverty reduction and socioeconomic development.