This chapter discusses the rationale or “why” of public sector innovation. Understanding the “why” question is vital because, without a purpose, innovations may not be successful or not worth trying. Innovations benefit nations, organizations, and employees differently, so understanding rationales for innovation is vital. This chapter provides information about rationales for innovation while summarizing the historical background and different levels of analysis. For example, innovations at the national level can increase national competitiveness, job creation, social wellbeing, economic development, and growth. Innovations in public organizations can increase the quality of public services and citizen satisfaction with these services. Innovations at the organizational level can increase employee creativity and performance. This chapter provides compelling stories about how and why public organizations must innovate.

There are tendencies either to exaggerate China’s innovative capacity and its threat to Western technological supremacy, or to dismiss it and attribute its technological progress to imitation, or worse, to the theft of foreign technologies. Chapter 6 addresses the role of technological progress and innovation in China’s rapid rise and evaluates its changing ability to innovate by using common indicators like the number of patent applications or grants, the number of scientific publications, and the amount of R&D expenditure. On a per capita basis, the gap between China’s level of innovation and that of the most developed countries such as the United States is still large. However, for a country that is still some distance from the technological frontier, the key question is not how big its innovation gap is, but whether the gap is narrowing and whether it is narrowing quickly enough. By this criterion, China has been by far the best performer among all developing countries. As technological innovation requires both physical and human capital input, the Confucian culture of thrift and education may have been the differentiating factor behind China’s rapid progress in science and technology.