Institutional Capacity and Public-Sector Innovation

Abstract

Institutional capacity is a fundamental determinant of public-sector innovation because governments require competent personnel, effective leadership, financial resources, technological infrastructure, organizational coordination, and regulatory authority to develop and implement new solutions. This article examines the relationship between institutional capacity and digital, organizational, policy, and service innovation in public institutions. It argues that innovation is not limited to adopting new technologies but includes redesigning services, improving administrative processes, developing collaborative governance arrangements, and creating policies that respond to complex public problems. Institutions with strong analytical capacity, professional employees, knowledge-sharing systems, adaptive leadership, and supportive organizational cultures are better positioned to identify problems, test new ideas, manage risks, and scale successful innovations. Conversely, limited resources, fragmented responsibilities, rigid procedures, political interference, and fear of failure can prevent innovation from becoming a sustainable administrative practice. The article also evaluates the roles of digital transformation, citizen participation, interorganizational collaboration, performance measurement, and institutional learning. It concludes that public-sector innovation produces lasting public value when governments combine technical capability with ethical governance, inclusion, accountability, and continuous evaluation