Knowledge, research, and innovation are of crucial importance for the competitiveness of an economy and a recipe for economic development not only for developed and developing countries, but also for entities surviving a political abnormality, such as the Palestinian territories. As Palestinians are currently planning for their future viable state, the policy and decision makers should formulate relevant science, technology, and innovation policies that encourage the different national sectors to utilize the available innovation potentials and the experience and support of other countries, for developing a competitive economy. Conducting and analyzing a community innovation survey on two major Palestinian industrial sectors, namely quarrying and stone fabrication and the food and beverages sector, brought about very promising indicators and showed high innovative potentials in both sectors. Employment, export, and revenues are clearly improved in innovative enterprises. Lack of cooperation between the industrial sector and the higher education and research and development institutions is found to be a major problem that should be tackled in order to strengthen the enterprises’ ability to innovate.