Under which conditions Sardinia - a peripheral island with a small population – can proceed along a steady path of economic development? This is the crucial question addressed in this paper which examines the economic and social situation of Sardinia within the national and the European scenario characterized by a strong polarization process fueled by agglomeration forces. The analysis suggests facing the demographic turndown by investing in education, innovation and local institutions in order to provide a better environment to citizens and firms and to exploit regional comparative advantages.