The article determines modernization as the foundation for the modern progressive development on the innovative principles. Modernization is explained through different angles and approaches to reflect its importance and indispensable role in ensuring competitiveness of the economic system to successfully operate in the globalized modern world. Substantiated is the fundamental principle that innovation lies at the heart of all modernizational processes and efforts which reflects modern developmental trends of advance and developing economies’ transition toward the knowledge-based economic systems and network societies. Also, modernizational potential is presented as one of the key economic elements in the developmental strategy of a country, and basic method for its evaluation is proposed.