Many efforts have been made in developing the National Innovation System (NIS) concept. However, there are the limitations, which do not make it operable and effective in practice. This investigation attempts to eliminate some limitations of the approach. The NIS is presented as three interrelated macro blocs: business environment, environment producing new knowledge, and knowledge transfer mechanism. The principles of performance and efficiency measuring of NIS are proposed. The system structure-object and functional approaches to NIS performance and efficiency are applied. The former is used for decomposition of NIS objects of high aggregation level. The latter is available for analysis of NIS efficiency and its factors. The methods allow the estimation of the NIS component by component and identification of the cause-effect chains of factor impacts on its elements. The key policy tools tailored to liquidate and mitigate market failure and NIS dysfunctions are proposed.
