Strategic drivers of innovation capacity: cross-country evidence on economic, human, and institutional enablers

National innovation capacity (NIC) is a critical driver of long-term competitiveness, yet the structural determinants that underpin its development remain underexplored. This study investigates the economic, human, and institutional enablers of NIC using an unbalanced cross-country panel and a two-step system GMM estimator. The results reveal that human capital, measured by researcher density, labour force size, and entrepreneurial activity, and institutional quality are the most consistent and significant drivers of NIC. In contrast, macroeconomic factors such as GDP growth, trade openness, and foreign direct investment play a supportive role, contingent on a country’s absorptive capacity and governance strength. The findings advance strategic innovation theory by highlighting that innovation cannot be sustained by economic conditions alone; it requires strong human and institutional foundations. The study underscores the importance of integrated policy strategies that develop human capital, foster entrepreneurial ecosystems, and enhance institutional quality, enabling countries to build resilient and strategically oriented innovation systems capable of supporting long-term technological advancement.