"In cases where innovation indicators and data fail to serve properly as a (necessary) basis for the design of innovation policies, it often has its roots in conceptual unclarities in the underlying concepts. The aim of this paper is to provide a theoretical and conceptual basis for the design of innovation policy. This serves two important purposes. Firstly, it allows the identification of problems in an innovation system that require public policy intervention through the choice of appropriate policy instruments. Secondly, it allows a theoretically based identification of input indicators as determinants of innovation system performance to be used in cross‐country analysis."