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The transition from primitive to advanced stages of economic development is to a large extent driven by technological progress. Yet, what are the forces that bring about improvements in technology along this long transition? To address this question, we propose a long% run theory of technological progress based on small% scale innovations by individual agents and study its implications in the context of a unified growth model. Our results highlight the important role of innovation% promoting institutions, such as property rights, which influence both the rate of technological progress as well as the timing of the transition from stagnation to growth. We also document the possibility of a growth trap for economies in which such institutions are weak or absent. Finally, we discuss how our innovation% based theory compares to one based on learning% by% doing and how it can better account for the diverging historical development paths of different regions of Europe.