Industrial and production development policies should focus on the acquisition of skills in new technologies and on innovation in order to achieve economic, social and environmental sustainability. Case studies in Argentina and Brazil show the need to develop policies that allow greater co-operative efforts between small and medium-sized enterprises (SMEs) and larger firms, fostering greater access to technology and major markets. Sustainability related innovations are desirable because of their positive externalities on the environment and because they offer competitive advantages for international integration.