Chapter 8 explores how industrial division of labor supports innovation-driven transformation. Drawing on Shenzhen’s experience, it argues that specialized supply chains and spatially concentrated industrial clusters enhance innovation by promoting economies of scale, knowledge spillovers, and technological diffusion. Empirical evidence suggests that well-coordinated supply chains and functional specialization significantly contribute to the efficiency and resilience of innovation systems. The chapter underscores the importance of aligning industrial and spatial policies to foster systemic innovation. It also highlights how public policy can facilitate these linkages by reducing structural bottlenecks and supporting long-term industrial development.