The present study builds on the results of an earlier 2003 project on the role of the chemical industry in driving innovation in other branches. The key aspects considered are recent developments regarding the role of the chemical industry as innovation source for other sectors, the innovation activities of the chemical industry in Germany from an international comparative perspective, and the framework conditions for innovation in Germany. Both innovation obstacles as well as potentials are especially investigated. The study concludes with some recommendations on how to improve framework conditions for innovation in the German chemical industry.