The importance of technological innovation to economic growth and state power is generally acknowledged in international relations. Less attention has been paid to the state's precise role in fostering innovation. This article argues that, contrary to realism, a centralized state is ill-suited to fostering innovation, particularly for technological leaders. Centralized states are more likely to make errors in crafting policy, and those errors cannot be reversed at the regional or local level. Decentralized states are better suited for the required tasks in fostering innovation. These hypotheses are tested against the Anglo–German rivalry for technological leadership in the late nineteenth century, and the US–Japanese rivalry of the last twenty years. In both cases the more centralized regime—Great Britain and Japan—faltered after initial successes. This suggests a tension within great powers. Policymakers prefer a strong, centralized state to facilitate policymaking. However, the evidence suggests that a decentralized state structure is a necessary condition for states to sustain themselves at the technological frontier.