Are there differences between public and private organizations? If so, what are they, and why do these differences matter for innovation? This chapter provides answers to these questions. It discusses the similarities and differences between public and private organizations, along with what makes public organizations “public.” Scholars have been discussing the unique aspects of public organizations for some time based on ownership, funding, control, and the personnel management system. Generally, if an organization is owned and controlled by the government, its funding primarily comes from the government, and its personal system is regulated or controlled by the government, then this organization is a public organization. Understanding sectoral differences matter because these distinctions may have different implications for different outcomes, including innovation. Thus, this chapter also discusses how these differences affect innovative activities in the public sector. For example, the rationale (the “why” question), the mechanism (the “how” question), the criteria for success, the measurement, accountability, the organizational climate, and the transferability of innovations differ based on the sectoral differences that this chapter explains.