Towards a functional framework for measuring national innovation efficacy

•Five functions of innovation systems are proposed: access, anchor, diffuse, create and exploit.•The notion of ‘innovation efficacy’ is presented to gauge innovation capabilities of countries.•A composite index is suggested to measure the innovation capacity and performance of economies.

In an increasingly globalised economy, the ability to draw in innovations and ideas from elsewhere and build on them to create value at home has become a powerful facility for economic growth. Since some places are better at adopting and adapting borrowed ideas than others, the function of ‘innovation through adoption’ deserves more attention at both scholarly and policymaking levels. Based on such beliefs, this paper elaborates the notion of ‘innovation through adoption’ and develops it further to advance the notion of ‘innovation efficacy’. The latter is interpreted here as the efficiency and effectiveness of innovation systems in terms of accessing, anchoring, diffusing, creating and exploiting innovations. This notion is further illustrated in a measurement tool based on a composite index, which we name the ‘Innovation Efficacy Index’.The ultimate contribution of the paper lies in its aim to shift the traditional focus of attention from a fixation with developing and exploiting new knowledge locally to the prospect of value creation through accessing, anchoring or diffusing knowledge acquired from elsewhere.