Background: Innovation is associated with improvement, however, there is little published about the “ingredients” for successful innovation in healthcare, and the skills required of Health Service Managers (HSMs) who facilitate change in their organisations. Aim: This paper synthesizes the findings of a literature review performed to describe the organizational and contextual factors that enable and sustain innovation in healthcare settings. Implications for the practice of Health Service Management and curriculum development have been extrapolated as innovation has been identified as a solution to escalating health system demands in a rapidly changing environment.Approach: A literature review used a systematic approach to source articles from the Scopus and Emerald databases over the period of 1993 to February 2016. Papers were also retrieved from a BMC Health Services Research weekly alert. Snowballing from relevant articles identified additional and significant papers. Grey literature, peer-reviewed papers and reports were similarly reviewed to incorporate contemporary perspectives on this topic across the business, health and University sectors, and to facilitate discussion of the skills and competencies for HSMs practice and education in relation to this topic. Context: Innovation is crucial to the sustainability and viability of Australia’s world class health system. There is potential for innovation to lead to more cost-effective and efficient ways to address the challenges of limited health budgets and increasingly complex morbidities in an ageing population. Main findings: Successful innovation according to the literature, is determined by a complex interaction of determinants including organizational culture, support and resourcing for innovation, leadership and a clear and shared vision. An organizational culture supportive of innovation includes strong transdisciplinary communication, engaged and invested staff and recognition of the role of innovation in health improvement and outcomes. A setting that is open to identifying, testing and evaluating initiatives for innovation requires capabilities to establish and maintain the working relationships, team dynamics and to prioritise resourcing to facilitate and sustain new ways of working, services, products or technologies.Recent research on the skills required for health service management employability and career success was also examined and identified the importance of skills such as communication, creativity and problem solving. These skills are critical and linked to the role of the HSM in accelerating innovation in their organisations.Conclusions: The key ingredients for successful innovation in health were inferred from the literature. HSMs are well positioned to support innovation as they possess the necessary technical and professional skillsets. The literature suggests that the development of graduate skills in the areas of communication, problem solving, and team work is critical to meet industry needs and for HSMs to enable innovation.Universities educating health service managers strive to ensure that graduates are professionals equipped to lead and manage health services. HSM graduates can foster the organizational and contextual factors that sustain and sanction innovative ideas to flourish and progress to implementation. Current research advocates that strong industry and higher education collaboration is important to further develop the graduate attributes necessary for innovation.