Innovation has been an important feature of the way companies produce products and services, and hence profits, since the dawn of capitalism. There is a considerable body of research, which explores innovation in the private sector. By comparison, public sector innovation is considered a relatively new phenomenon, and there has been less research into it. How does private sector innovation influence the public sector? Are the learnings from the private sector applicable to the public sector? Private sector organizations are owned and managed by individuals or private companies and exist to make a profit. Innovation is directly linked to wealth generation. On the other hand, public sector organizations are owned and controlled by Government and most are largely funded by taxes, fines and regulatory fees; only a small number of Government agencies are run as businesses and are expected to make a profit. So the motivation to innovate is not as strong as in the private sector. However, Governments have often been decisive players in the development of the pioneering technologies of the past century. The aim of this chapter is to provide an overview of the way the private sector innovates and compare and contrast it to the way the public sector innovates. What are the similarities and differences? The chapter explores: theories and dimensions of innovation; types of innovation; the characteristics of innovation; the factors or dimensions influencing the capacity of organizations to innovate; and models and frameworks of innovation. It examines how the public sector can become more innovative by leveraging off the successes in the private sector, and provides some practical guidance to managers, executives and practitioners.