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This case study has the following objectives: to provide theoretical fundaments and describe the proposed conceptual model for the formulation of the ST&I policy for the state of Bahia-Brazil, and to describe the methodological procedures adopted and the partial results of its application. Four concepts support this conceptual model: Sustainable Development, Local Productive Arrangements (LPA’s), Local Systems of Innovation (LSI’s) and Networks. These concepts orientate one’s view in the innovative process as a result of interactive actions between social actors, besides underlying its evolutionary path. In spite of the advances, four principal challenges remain: the definition of impact indicators; the effective incorporation of the “priority principle”; the continuation of specific research and setting up of data bases on priority APL’s; and improving the governance structure to deal with different stakeholders.