Incentives to Innovate in Public and Private Organizations

Abstract

This article uses the different perspectives of economic theory, organization theory, public administration, and political science to explore the question of whether public organizations are inherently less innovative than private organizations, and synthesizes existing empirical evidence to test the predictions and explanations of theory. Theory generally leads one to expect that public organizations are less innovative than private ones, though the logic used frequently is tortuous. Empirical evidence, though limited, gives reason to doubt the hypotheses that public organiza tions are inherently immune to efforts to increase innovative behavior there. Some of the public policy implications of each discipline's perspective on the central ques tion are discussed and examples of efforts to apply these implications to public agencies are presented.