Journal of Service Science and Management, 2011, 4, 401-418
doi:10.4236/jssm.2011.44046 Published Online December 2011 (http://www.SciRP.org/journal/jssm)
401
Enabling Innovation in Complex Welfare
Service Systems
Harri Jalonen1, Pekka Juntunen2
1Turku University of Applied Sciences, Turku, Finland; 2University of Lapland, Rovaniemi, Finland.
Received August 24th, 2011; revised September 29th, 2011; accepted October 24th, 2011.
ABSTRACT
This paper explores the potential for innovation in welfare services. Using the complexity lens, the paper presents a
theoretically founded basis for enabling innovation in complex public-private welfare service systems. The empirical
data was collected by conducting semi-structured interviews with leading office holders responsible for social services
in the City of Helsinki (Finland) and executive managers of social services producer organizations. As a result, this
paper presents and discusses pro-innovation conditions for innovations in welfare services. Pro-innovation conditions
consist of four dimensions : 1) creating trust, 2) increasing communication responsiveness, 3) utilising connectivity and
interdependencies, and 4) pursuing diversity. This paper claims that the interaction processes have an unknown poten-
tial that can be translated into a resource for improving innovation performance in welfare services. The paper also
presents research and managerial implications. It is argued that complexity thinking opens up potential for the move-
ment of thought in innova tion research . One avenue for future research could be to get more deeply understanding why
some organizations are able to be more responsive to evolving innovations than others. In order to answer this question,
we suggest elaborating the consequences the conventional management and administrative activities may have on in-
novation in complex welfare service systems. The paper reflects empirical findings on the literature of innovation and
complexity, and thereby might open new insights for practitioners to interpret their own innovation environment. One of
the most importan t issue linked to innova tion management is the accep tance of the parado x of “being in charge but not
in control”. Instead of equaling management with the elimination of uncertainty related to innovation processes, man-
agement should be seen consisting of activities that have effects on ongoing interaction processes within the complex
welfare service system. These effects can be anticipated, but not fully known. We suggest that managing innovation in
complex welfare service systems require the ability to articulate emerging themes, to stand “co-opetition” states of di-
versity, to acknowledge the boundaries of rational thinking and resist the urge to rapidly draw conclusions, and reflect
on one’s own behavior and its consequences.
Keywords: Innovation Management, Welfare Services, Service Innovation, Welfare System, Complexity Theory,
Uncertainty
1. Introduction
Increased demand for welfare services, especially due to
an ageing population, has raised concerns about the ef-
fectiveness of welfare services provision. At the same
time, increasingly complicated customer requirements
mean that the welfare service system needs to be more
responsive. Despite different starting points and motiva-
tions, solutions for the above-mentioned issues are ex-
plored in the field of innovation research. A rather gen-
eral assumption is that problems concerning the effec-
tiveness of welfare services and service system respon-
siveness are only solved if service systems are able to
develop innovative working methods and practices. In
this sense, innovativeness is seen as a ‘silver bullet’–a
cure for a disease, which, in the case of welfare issues,
manifests itself as either service ineffectiveness or in-
flexibility within the service system [1-5]. However, de-
spite the broad agreement on the need for service innova-
tion, many organizations still struggle with deficiencies
when it comes to innovating services [6].
Today, there is a tendency for a growing number of
welfare services to be provided by co-operation between
the public and private sectors. The attractiveness of co-
operation is the result of a logic that arg ues that the chal-
lenges of effectiveness and responsiveness on the part of
welfare services are solved by combining the comple-

Enabling Innovation in Complex Welfare Service Systems
402
mentary and substitutive capabilities possessed by dif-
ferent organisations. There are many alternative points of
view with which to examine these tendencies for co-ope-
ration—such as networks, public-private partnerships
and governance. In the twenty-first century we can talk
about “public management networks”: officials exchange
information, manage knowledge and address problems of
mutual concern. Organizations collaborate and network
for public purposes, e.g. matching services, or solving
policy problems [7], or creating “shared value” [8]. In
network management it is essential to account for differ-
ences within a network because the differences provide
strategic opportunities and constraints for managers in-
volved in coordinating mixed-sector networks [9].
Public-private partnerships (PPP) have been much dis-
cussed throughout Europe. PPP is defined as “coopera-
tion between public and private actors with a durable
character in which the actors develop mutual products
and/or services and in which risk, costs and benefits are
shared” [10]. In an ideal PPP, the traditional distinction
between public and private is dissolved, and the public
and private partnership is based on the idea of mutual
added value [10]. Partnerships are organizational mani-
festations of institutional design for co llaboration [11].
The term “governance” has been used in a variety of
ways, but is most often presented as an attempt to im-
prove co-ordination between relatively dependent,
autonomous actors. It involves the horizontal steering of
relations across networks [12-14]. Operating in the com-
plex environment of action, new forms of governance
have to be taken into account by recognizing the need for
interaction and co-operation between the public, private
and other actors.
It is mixed-sector co-operation that is seen to provide
fertile ground for innovations in welfare services. How-
ever, while co-operation increases innovation poten tial in
welfare services, it should be noted that co-operation also
creates complicated organisational interlacings, which, in
turn, may lead to a situation where this innovation poten-
tial remains unrealised. In this paper, it is public-private par-
tnerships that are seen as produc ing complexity in welfa-
re services. In a sense, this paper can be considered a
continuation of the (complex) governance paradigm [12,
15-19] Despite subtle differences in nuances between au-
thors, the acknowledgement that governance processes
consist of interaction between multiple interdependent
actors from the public and private sectors is common for
all complexity-oriented governance approaches. The in-
terplay between the actors produces dynamics and com-
plexity–i.e. nonlinear behaviour and unpredictable out-
comes–in the “system”. In complexity-oriented literature,
the system as a “whole” implies an emergent structure
that cannot be understood on the basis of what is known
about the individual components of these systems. Emer-
gence is based on both the self-organization within the
system and the co-evolution between the system and its
environment. For the innovation, and for this paper, all of
this has two implications: firstly, attention should be paid
to the interaction processes between different actors, and
secondly, an “open systems” view (instead of “closed
system”) of the governance processes should be favoured.
“Interaction process” refers herein to the activities of the
actors—i.e. people; representing themselves and/or or-
ganisations [20] whereas “open systems view” includes the
idea that resources flow into and out of the organization
and that the system is embedded in larger systems [21].
Stressing the significance of the interaction and the open
systems view implies that disturbances and triggers ori-
ginating outside the system are processed endogenously
by the actors in the system. Therefore, this paper stresses
the quest for innovations through interaction within a
complex system and between the system and its envi-
ronment.
In this paper, innovation is defined as context specific
“novelty in action” [22]. This includes the idea that in-
novation is a specific form of change [23-25]. Innovation
is about change because it represents discontinuity or
break with the past [25]. This discontinuity challenges
the management of public-private relationships in trans-
lating new ideas into new forms of action and improved
welfare services. Bringing together the promises of in-
novation and the complexity of public-private partner-
ships (particularly in the welfare service domain), we
pose the following research question: what kinds of ena-
bling practices can be used in supporting innovation in
complex welfare service systems?
By “welfare services” we refer to health and social ser-
vices that are on the responsibility of the public sector.
The we lfar e serv ice pro vide rs, i.e. we lfare s ervice s ystem,
include public organizations, private firms, non-profit a-
ssociations, and foundations. The resulting welfare ser-
vice system is complex in the sense that it produces be-
haviour that cannot be understood as the sum of its parts
[26].
Using the complexity lens, this paper endeavours to de-
velop a framework that deepens our understanding of
managing innovations in a welfare service system. In-
stead of unified theo ry, “complexity lens” refers herein to
a wide set of concepts that can be used to explore the
dynamics of socio-economic systems [26,27]. Although
complexity thinking has gained popularity in the social
sciences since the early 1990s, it is still an under-ex-
ploited approach, particularly in the domain of innova-
tion in welfare services. Especially sparse are empirical
studies and complexity-informed conceptual models [12,
28,29]. In addition to the lack of previous research, the

Enabling Innovation in Complex Welfare Service Systems403
choice of complexity lens can be rationalized for two rea-
sons: firstly, it offers a promising approach for investi-
gating the internal dynamics of innovation in a welfare
service system, not forgetting the relationship between
the system and its environment, and secondly, it implici-
tly acknowledges the complexity or the wickedness of
issues in public policy [29], particularly in the welfare
domain [30]. Adapting Johnston et al. [31], we argue that
the complexity lens allows us to raise new questions and
explore new approaches to manage innovation in welfare
services.
2. Research Design
This paper is composed of two parts. The first part con-
centrates on the concept of innovation and factors that
affect the innovation of welfare services in general. The
importance of innovation in the welfare domain is dis-
cussed, and thereafter the relevance of the complexity
theory within the context of innovation in a welfare ser-
vice system is presented and discussed. This conceptual
part is based on reviewing the relevant innovation and
complexity literature. As a result of this part, a basic un-
derstanding of the phenomenon of innovation in a wel-
fare system is formed.
The conceptual understanding is deepened in the em-
pirical part of the paper by studying the system-level
innovation in the Social Services Department of the City
of Helsinki, Finland. The ‘value network’ of a Social Ser-
vices Department serves as an illu strative empirical case.
The methodology of the second part of this paper can be
characterized as qualitative in nature, an approach that is
common in studies whose purpose is to gain understand-
ing of how practitioners “define th e situation” [32]. Qua-
litative case-study was chosen, because it is flexible and
enables in-depth exploration of perceptions from a limi-
ted number of enlightened individuals. The empirical pa-
rt of the paper is based on interviews that were conducted
as the first part of a two-year research project called “Ma-
naging the value network of welfare services”. A term
“value network” is used by the city officials. The City of
Helsinki is a large municipal organization with around
40,000 employees and an annual expenditure of around
3000 million Euros. Most of the income is derived from
tax revenues. Currently, the network of social services is
highly fragmented and difficult to perceive. Therefore,
the value network has been launched as a strategic con-
cept for describing the complex operating environment.
The Social Services Department has five resp onsibilities:
Child Day Care Services, Services for Families with Chil-
dren, Adult Services, Elderly Services, and Management
and Development Centre. The department produces wel-
fare services in about 750 un its. Services are also bought
from over 500 external producers. The amount of out-
sourced services has steadily increased and in 2010 the
department was buying services with about 220 million
Euros. The value network of the Social Services Depart-
ment has formed over a long historical continuum and
today it forms a multi-layer network of very diverse
agreements and relationships. This particular service sys-
tem provides an interesting field for the development of
system-level innovation thinking due to its societal im-
portance and its highly intangible outputs and outcomes.
Adapting the open systems view, the value network of
the Social Services Department of the City of Helsinki is
embedded in a larger system—i.e. the Finnish Welfare
State [33].
The empirical data was collected by conducting 17 se-
mi-structured interviews with leading office holders re-
sponsible for social services in the City of Helsinki (n = 9)
and executive managers of social service producer orga-
nizations (n = 8). All of the interviewees hold a manager
or director position in their organization. Based on the
experience of the interviewees, it is reasonable to expect
that they have “something to say on the topic” [32]. The
topics of the interviews were determined by issues iden-
tified in the relevant innovation and complexity literature.
The interviews included three open-ended questions de-
signed to elicit primary success and failure factors for
innovation in the value network of social services in the
City of Helsinki. The questions were as follows: 1) Whi-
ch factors do you think facilitate or hinder the presenta-
tion of new ideas in the value netwo rk of social services?
2) Which factors do you think facilitate or hinder the
adoption and implementation of the new ideas in the va-
lue network of social services? 3) How are the citizens/
customers engaged in the innovation processes of the va-
lue network of social services?
The interviewees were selected on the basis of their
positions and their experience. Each interview lasted
approximately 60 minutes to 90 minutes and was recor-
ded on an audio tape. The recording tapes were transcri-
bed. The empirical material collected in these interviews,
were analyzed by using Yin’s [34] pattern matching logic.
In this paper, pattern matching refers to a method where
interview material was interpreted by the concepts of
complexity theories. In the interpretation stage, two in-
ternal workshops were held in which information gained
from the interviews was discussed by all five researchers
engaged in the research project (Managing the value
network of welfare services). This was done in order to
avoid the tendency to confirm the individual researcher’s
personal preconceived notions [35,36]. Information-pro-
cessing biases were reduced “by looking at the data in
many divergent ways” [36]. The results of the interviews
are presented and analyzed in the same section together

Enabling Innovation in Complex Welfare Service Systems
404
with the quotes from the interviews. The role of the
quotes is meant to elaborate the ideas being dealt with.
For reasons of space, we are obliged to choose a limited
number of quotes. However, they are meant to be as in-
dicative as possible. Instead of structuring the empirical
findings into a question-and-answer format, the empirical
findings and the discussion are combined and presented
in the same section. This kind of composition is quite
typical in exploratory studies that debate the value of
further research into various propositions [34]. The pur-
pose is to present the information gained from the inter-
views in its “diversity, allowing the story to unfold from
the many-sided, complex, and sometimes conflicting, sto-
ries” that the actors in the interviews were told [34]. How-
ever, in order to avo id a complete mess and to contribute
to academics, the empirical findings were structured the-
matically; on the one hand, the themes are based on the
literature and on the other on the analysis of the semi-
structured interviews. The four themes are trust, respon-
siveness, connectivity/interdependency and diversity. The
themes all resonate with complexity thinking–the theo-
retical framework of this study. Thus, in addition to im-
proving the readability of the paper, the interpretation of
the empirical findings with the concepts of complexity
theories strengthens the validity of the research [34].
We believe our study is reliable, valid and objective,
both in its empirical material and results. When it comes
to the overall reliability and validity of the study, reli-
ability in qualitative research can be measured with the
solidity of the empirical findings or the authenticity of
the empirical research material. Accordingly, the validity
of the research can be measured with the portability and
constancy of the empirical results. We think the results of
our study (see Section 5) respond well to the research
questions and aims of our study. Furthermore, they re-
spond well to our empirical case. Therefore, we argue
that our empirical results can be utilized more widely in
innovation management research in the welfare/public
service context.
3. Innovation as a Novelty in Action in a
State of Uncertainty
The term innovation refers to a new idea, product, ser-
vice or technology which is realized [37,38]. This rela-
tively simple definition of innovation comprises two im-
portant dimensions. On the one hand, the term innovation
is confined to ideas that are both novel and useful. Inno-
vation is more than just a new idea. An idea becomes an
innovation when it is being implemented in some com-
munity. On the other hand, novelty as criteria for innova-
tion is context dependent. That is, an idea need not have
scientific or global novelty to be regarded as an innova-
tion. It is the perception of novelty, by those involved,
which is central to definition of innovation [38]. It is ar-
gued that, in the public sector, innovations are typically
evolutionary or incremental in nature [39]. This means
that innovation is new to a particular public organization,
though it may have previously been applied elsewhere
[40].
The social debate concerning innovation has been do-
minated by the dualistic view of the private and public
sector. The general conception is that public sector is bu-
reaucratic, inactive, and constant arena, which provides
only a limited space for innovations, whereas in the pri-
vate sector the firms continuously develop new products
and production processes in order to be competitive and
survive in the market. The differences in innovation ca-
pability between the public and private sector can be ex-
plained comparing how these sectors perceive risk-taking
and failure. There is a broad understanding in th e innova-
tion literature that innovation process requires experi-
mentation and high tolerance for risk-taking and failure
[41]. A strong realistic view is that, in business, as in
nature “most things fail” [4 2]. Therefore, private markets
thrive because they generate considerable failure [2]. As
Bhatta [43] notes, “firms can sustain several failures that
shareholders can accept as long as one success yields on
an average a positive rate of return”. In other words, fi-
rms evolve by failure and experimentation. In contrast to
firms, in the public sector risks and failures are managed
by avoiding them [43]. Public sector organizations rarely
have the “luxury of living with several failures reg ardless
of how many policy successes they may have” [43 ]. Fur-
thermore, it is argued that the public sector suffers from
the lack of success mechanisms. Borins [37], for example,
has pointed th at the public sector h as “asymmetric incen-
tives” for innovations. Incen tives are asymmetric, becau-
se successful innovations are not rewarded, while unsuc-
cessful innovations may have grave consequences. Espe-
cially innovations that decrease the need for resources
are averted in the public sector because they cause to lose
stature and prestige of the public-service institution [23].
However, despite the above mentioned problems, innova-
tions have grown increasingly popular in recent years al-
so in public services [1,2,5,15,37,44]. Demand for inno-
vation has been a central argument of New Public Man-
agement (NPM) [2]. NPM refers here to a set of admin-
istrative doctrines that target improving efficiency in the
public sector by increasing the public sector manager’s
operative autonomy, which, at best, is realized as a hig-
her degree of flexibility [45]. Innovations are ne eded par-
tly due to increasing pressure to respond to the demands
from the customers and partly due to diminishing re-
sources for supplying services. In an evolving economy,
there will be an ongoing need for innovations also in the

Enabling Innovation in Complex Welfare Service Systems405
public sector [5].
According to Fonseca [46] and Aasen [47], the main
concern for innovation researchers has focused on the
question of how organizations should innovate, rather
than the question of how they actually do so. Therefore,
it is not surprising that innovation processes “are seen as
consecutive acts of creation and adoption of novelty, in-
tended to lead to va lue creation both for the creating and
the adopting organizations” [47]. The mainstream think-
ing in innovation research seems to be that it is possible
to design a system that has the capacity to innovate [46,
47]. A little pointedly, it can be said that this kind of
thinking is based on the assumptions of rational decision
making and perfect information. Rational decision mak-
ing and perfect information refers to a situation where in-
dividual can choose among alternatives by relating them
to goals. This also involves ind ividuals understand ing the
consequence of every choice in relation to a particular
goal. By revealing the causes and effects of each phe-
nomenon, systems can rationally “align” themselves with
the changing environment.
However, in practice, rational decision making and
perfect information are unlikely to be correct for real-
world situations. In the words of Fonseca [46], the prob-
lem is that “all these [rational] activities do not resonate
with experience of everyday life”. In the real world, no-
one has full knowledge of every possible alternative and
its various outcomes. Instead of rationality, individuals’
behaviour can be characterized as bounded rational [48].
It is bounded rational because of limited information an d
because of limited cognitive capabilities. In the context
of innovation, bounded rationality manifests itself as
uncertainty about the future. Uncertainty is a result of an
innovation because it “presents an individual or an or-
ganization with a new alternative or alternatives, as well
as a new means of solving problems” [38]. The existing
literature identifies several sources of uncertainty in the
innovation process. Bessant [49], for example, has cate-
gorized innovation uncertainty as falling into technolo-
gical, market and political/economic/regulatory uncertain-
ty. Souder and Moenaert [50] have offered a little more
accurate categorization and have indentified four sources
of innovation uncertainty: consumer, technological, compe-
tetive and resource uncertainty. Cantarello et al. [51], in
turn, have stressed behavioral uncertainty around innova-
tion. Furthermore, Macdonald and Jianling [52] and Hal-
besleben et al. [53], among others, have identified the ti-
ming of innovation as a source of uncertainty.
Based on the above, it is argued that decisions in in-
novation processes are without exception made on a high
level of uncertainty. This is because the most important
decisions, with the greatest implications, are made in the
early stages of the innovation process, before all the re-
levant information is av ailable [54]. Decision uncertainty
is partly due to a lack of information [55] and partly due
to the existence of multiple interp retations [56]. Whether
uncertainty is a result of information scarcity or informa-
tion ambiguity, it is obvious that uncertainty is, in most
cases, an uncomfortable state for individuals [38], and,
this being the case, people seek information that helps
them to distinguish between the options and make one
appear more attractive or more likely than another [57].
In other words, individuals seek information in order to
create a feeling of control over events [58]. Information
is sought in order to reduce the uncertainty related to
innovation.
Nonetheless, despite any possible ‘negative feelings’
caused by uncertainty, within the context of innovation,
uncertainty also has a positive o r at least neutral meaning.
Johnson [59], for example, has linked uncertainty and
entrepreneurship. Johnson [59] portrays the tolerance of
uncertainty and ambiguity as a necessary condition for
making things happen. Similarly, Gerwin and Tarondeau
[60], Souder and Monaert [50] and van Riel et al. [61]
have argued that innovation is a process of coping with
uncertainty. Hanft and Korper [62], Rogers [38] and Fo-
ster [63] have offered a more positive approach to uncer-
tainty. According to them, uncertainty is a necessary con-
dition for innovation because it may actually improve de-
cisions and can help to achieve agreement when “honest
differences in fact and values might otherwise lead to in-
transigence” [62].
Whether innovation is seen as a phenomenon engen-
dering uncertainty (which should be reduced by informa-
tion seeking) or as a necessary condition for innovation,
the mounting literature concedes that innovation take
place more often within and in cooperation between in-
dividuals in different organizations [38,64-66]. Problems
caused by limited information and limited cognitive ca-
pabilities are more often reduced by enlarging the num-
ber of participants. Collective action and social support
are needed for creating meaning with which to interpret
the complex world and for reducing the feelings of un-
controllability [58]. For example, the concept of open in-
novation is increasingly applied to a situation where
knowledge and experience is exchanged across organiza-
tional boundaries [6 7]. It seems that we have come to era
where innovations are more often developed within a
complex set of rela tions between actors with various dif-
ferent backgrounds. Given the potentiality of collective
actions in reducing th e inherent uncertainty in innov ation,
we propose that the mystery of innovation hides in com-
plex intra- and inter-organizational interaction processes.
It is these complex interaction processes that are funda-
mental for creating innovations that are based on the not-
yet-known. Therefore, we also need to elaborate the es-

Enabling Innovation in Complex Welfare Service Systems
406
sence of complexity in the welfare services domain.
4. Complexity Lens in Understanding
Innovation in a Welfare
Service System
It is widely argued that the public sector environment is
more complex than that of the private sector [15,68]. A
common perception is that the complex operational en-
vironment imposes special req uirements, which drive th e
welfare sector to implement new kinds of patterns. In
spoken language, complexity often means a situation or
problem that is difficult to understand or is complicated
to handle. In this paper, complexity is seen more pre-
cisely: it is a basic property of a system. This paper treats
complexity as a ’handle concept’ that is used to discover
new perspectives on managing innovation in the context
of welfare services. Mitleton-Kelly [26], for example,
considers complex ity neither :bad” nor “good” ; for her, it
is just that it helps us to understand th e nature of the wo-
rld—and the systems—we live in [26]. However, in this
paper we use complexity more in a positive rather than
negative manner. Adapting Morcöl [69], we make the
case that “complexity is not just a negative designation
(“that the world is too complex to comprehend”), but a
positive one”. The strength of complexity t hinking is that
it may explain why the whole is more (or less) than the
sum of the parts and how all its components come to-
gether to produce overarching patterns as the system
evolves and adapts [26,70]. We consider the complexity
lens a fresh approach to exploring innovation in a com-
plex welfare service domain.
In the social sciences, complexity theory gained popu-
larity during the 1990s, particularly within the work of
Kooiman [71], Luhmann [72], Byrne [73] and Cilliers [74].
Operating with concepts such as dynamics, complexity
and diversity, Kooiman [71], for example, argues for new
forms of governance that recognize the need for interac-
tion and cooperation between public, private and other
actors. In the 2000s, governance issues have been ad-
dressed from the complexity vi ew, as in the work by Sta-
cey and Griffin [75], Meek et al. [18], Klijn [12], Teis-
man et al. [76] and Morcöl [2 8 ].
Nonetheless, it should be noted that the complexity
does not comprise a single, unified theory, but rather a
family of theories arising from the fields of biology,
physics, chemistry, computer simulation, evolution and
mathematics [26,27]. Mitleton-Kelly [26], for example,
emphasizes that complexity theories or thinking enriches
traditional systems theory by amplifying the additional
characteristics of complex systems and by stressing their
inter-relationship and interdependence. In the words of
Morcöl [69], “complexity theory offers a structural (sys-
temic) understanding of complexity”. Complexity mani-
fests itself in the relationships and interdependencies
between actors, and the systemic wholes they constitute
together [69]. Hence, adapting Eppel [29], we argue that
contrary to the conventional notion of thinking, which
stresses the achievement of optimal or best solution to
problems, the complexity lens indicates that we need to
think about the conditions that facilitate the “pro-inno-
vation” emergence in local contexts. Instead of seeing in-
novation as a “rational” process that consists of “con-
secutive acts of creation and adoption of novelty, in-
tended to lead to va lue creation both for the creating and
the adopting organizations” [47], this paper proposes that
innovation emerges from complex intra- and in-
ter-organizational interaction processes within the wel-
fare service system. In other words, innovations cannot
be imposed; rather, they emerge from the auspicious
conditions [76,77].
Despite the potential of complexity thinking for inter-
preting innovation processes in complex welfare systems,
it has some limitations too. One of the most significant
limitations relates to the roots of co mplexity thinking. As
Mitleton-Kelly [26], Mitche ll [27], Pollitt [78] and Eppel
[29], among others, have stated, complexity-oriented ideas
and concepts have their origins in the natural sciences.
Due to the history of complexity thin king, we agree with
Morcöl [28,69], who has argued that researchers should
be aware of some fundamental differences between natu-
ral and social systems—not least the fact that people are
capable of taking purposeful actions. Contrary to na-
tural objects, predicting human behaviour is difficult (or
impossible) since “people learn and adapt and change”
[29]. People can behave unpredictably and intelligently
at the same time. They have, for example, multiple iden-
tities and can fluidly switch between them without con-
scious thought [77]. They can also make decisions based
on their previous experience, rather than logical, defina-
ble rules [77].
Complexity thinking has also received criticism becau-
se of its perceived inability to offer an ex planatory value.
Pollitt [78], for example, has criticised its usefulness for
studying public administration, public policy and gover-
nance. The focus of Pollitt’s critique is that complexity
thinking does not comprise an articulated framework–a
distinct theory from which empirically verifiable claims
can be derived. While understanding the main point of
Pollitt’s critique, we argue that the real value of comple-
xity thinking is in its ability to challenge some long-held
scientific v iews, like r eduction ism and lin earity [69 ]. Com-
plexity thinking challenges some basic assumptions of
Newtonian science that underlines scientific management
[77]. Contrary to Newtonian science, which is grounded
on certainty and pred ictability an d en co urages si mplifica-

Enabling Innovation in Complex Welfare Service Systems407
tions in management, complexity thinking argues that
change and uncertainty are basic properties of a complex
world and therefore simplifications in management will
fail. Adapting Morcöl [69], we consider complexity not
as a theory in a strict manner but as useful approach,
since it “makes us appreciate the complex nature of the
realities and uncertainties in knowledge processes this
complexity generates”. Perhaps, the strongest argument
for complexity thinking is its potentiality to address un-
certainty inherent in innovation processes—particularly
in the context of a complex welfare system.
In welfare service system, complexity can be divided
at least into three dimensions. Firstly, complexity refers
to the feature of the system. A system can be defined as a
complex system if it exhibits an emergence phenomenon
occurring due to the connectivity and diversity of its
parts. According to Goldstein [79] “emergence” refers to
the “coming-into-being of novel, “higher” level struc-
tures, patterns, processes, properties, dynamics, and laws,
and how this more complex order arises out of the inter-
actions among components that make up the system it-
self”. An emergent whole is more or less than the sum of
its parts. Instead of being “a magical sundering of causal-
ity”, an emergence refer herein to “an outcome of varie-
gated and constructed dynamics generated out of interac-
tions” between the lover level actors that constitute the
system [80]. This means that, while the complex system
is aggregated from its parts, the interplay of these parts
produces emergent patterns which cannot be analytically
reducible to the constituent parts [70]. Emergence results
from the process where each welfare service provider (i.e.
public organizations, private companies, and non-profit
organizations) continually decide with which other orga-
nizations it will engage, and what information and other
resources it will exchange with them [80]. Furthermore,
in the context of welfare services, customers/clients have
important roles to perform in service operations. They
participate and influ ence both the produ ction and the out-
puts, for example, by providing information about their
health and by exercising rehabilitation actions [81]. Vie-
wed with the complexity lens, relationships between the
system and its environment create nested, interacting and
interdependent systems [29,82]. This means that the va-
lue network of the Helsinki Social Services Department
is an open system in the se nse that it exchanges informa-
tion, resources and ideas with its environment [29]. That
is to say that the value network co-evolves with other
systems. What is important is that innovations are emer-
gent and result if at all from dynamic interaction and
feedback processes both within the actors in the welfare
systems and between the system and its surrounding en-
vironment.
Secondly, complexity arises from the nature of the is-
sues in the welfare domain. Public policy problems can
be characterized as “malignant”, “vicious” and “tricky”
[2]. Such problems, especially in welfare domain, are
“wicked pro b l em s ” in a sense that they have no definitiv e
formulation; solutions are not true or false; there is no
test for a solution; every solution has a consequence; they
do not have simple causes; and they have numerous pos-
sible explanations which in turn frame different policy
responses [2,83]. In health care services, for instance, a
good example of a wicked problem is the goal to increase
the equality in service delivering while simultaneously
trying to decrease the costs of the care. In short, a wicked
problem is subjectiv e in the sense that everyone can have
an equally “right” opinion about it. Therefore, the proc-
ess of tackling a wicked problem is political it is an ar-
gument and a deliberation [30].
This leads to the third feature of the complexity, n ame-
ly the complexity of objectives and values in public sec-
tor. Comparing to private sector, it is said that public se-
ctor fulfills various values and pursues multiple go als [84,
85]. Kalu [85], among others, has noted that “whereas
efficiency in the private sector is achieved through re-
ductions in the cost of operation and in the generation of
profits, efficiency in the public sector is secured through
marginal cost reduction through gauging clientele satis-
faction as well as procedural adherence to the rule of law,
due process and obedience to legislative mandates”. Ac-
tually, the interpretation of the concept of ‘efficiency’ is
often flawed when applied to the public services. Effi-
ciency refers to how much an organization can produce
for a given amount of resources. In welfare domain, the
service efficiency is typically measured in terms of units
of service (e.g. in bed-days of care) delivered, divided by
the units of service (e.g. number of employees) needed.
However, this does not offer conception of effectiveness
of the services, i.e. what is the amount of ‘welfare’ these
services are provided. The other problem in defining ser-
vice efficiency as a ratio of input/output process is that it
is only meaningful with respect to assets and services
that already exist. As Potts [5] notes “it excludes from
the outset criteria that relate to the innovation of new ser-
vices because the efficiency criterion is meaningless in
such cases”. Many authors [2,5,43] have concluded that
public sector suffers ‘innovation deficit’ which can be ex-
plained by the detrimental side-effects of pursuing effi-
ciency. According to Potts [5] innovation is difficult in
the public sector because the goal of efficiency is incon-
sistent with the goal of innovation. Paradoxically, “good
values” such as efficiency, accountability, and transpar-
ency may lead emergence of higher lever [a]dynamics,
which can ossify the structures of welfare provision. An
emergence, in this sense, manifests itself as inability of
the welfare service system to change and grow through

Enabling Innovation in Complex Welfare Service Systems
408
experimental endeavour in order to meet new environ-
mental threats and opportunities [2,5]
It is evident that an evolving economy requires evolv-
ing policy. We think that at the heart of this evolving
policy is the welfare service system’s ability to generate
innovation in consequence of new ideas, along with
change in the capabilities, organization, connections and
behaviour of the actors that compose the welfare service
system [5]. Furthermore, in order to tackle “wicked pro-
blems”, the welfare service systems must develop dyna-
mic, collaborative and resilient abilities [2,70]. They are
needed to craft solutions to wicked problems that the ac-
tors involved did not know would occur [2]. In a dyna-
mic, collaborative and resilient environment experiments
and also failures are tolerated. Ad apting Schön’s [86] and
Parsons [2] ideas of a learning system, we propose that
story of successful innovation is actually that “form fol-
lows failure”. Potts [5] has nicely captured this role of
failure in innovation when he argued that “when fear of
failure replaces a capacity to experiment and create trial
and error learning, the result is unlikely to be an artefact
that actually works”. The problem is that, as mentioned
earlier, an innovation that does not work is not an inno-
vation at all. From the point of view of this paper, the
real issue, therefore, is, on the on e hand, how to facilitate
processes of “seeing things in the new way”, and, on the
other hand, how to ensure that “things are done differ-
ently”. In other words, what kinds of enabling practices
can be used in supporting innovative actions in complex
welfare systems. We argue that what is needed is not
“good design” for innovation per se, but creating condi-
tions that allow (positive) emergence to occur. Adapting
McLaughlin et al. (2002), we think that the secret of in-
novation in the public services lies in managerial actions
rather than administrative structures. It is people who
innovate, not ad ministrative artefacts.
Before considering the pro-innovation conditions in
detail, it is necessary give a brief summary of those ele-
ments of complexity thinking that are most important in
light of this paper (i.e. enabling innovation and coping
with uncertainty in innovation). This summary is espe-
cially based on work by Luhmann [72], Mitleton-Kelly
[26], Aasen [47], Stacey [70] Morcöl [28,69] and Eppel
[29].
The feedback processes are reflexive influence patte-
rns that arise from the interaction between the system pa-
rts and between the system and its environment. Without
interaction and feedback there is no emergence or self-or-
ganization. Positive feedback enhances and stimulates a
system’s capability, whereas the effects of negative feed-
back are the opposite (detracting/inhibiting). Self-orga-
nization refers to a more or less spontaneous process wi-
thout externally applied coercion or control, whereas e mer-
gence means new levels of order. Self-organization con-
sists of phases such as production of uncertainty, chaos,
reduction of uncertainty and, finally, new organization.
Emergence manifests itself as a complex organizational
structure growing out of simple rules. Non-linearity im-
plies that the behaviour of the system may not depend on
the values of the initial conditions. In complex systems,
dynamic interactions are non-linear i.e., minor changes
can produce disproportionately major consequences and
vice versa. Nonlinear behaviour is unexpected, unplann-
ed, unfamiliar sequences that may or may not be visible
or comprehensible. Connectivity and interdependence po-
ints out that actions by any individual may affect (con-
strain or enable) related individuals and systems. This
means that the whole is not to be found in its parts. In
addition to connectivity and interdependence within the
system, systems are also connected to other systems. The
result is nested, interacting and interdependent systems.
Therefore, it can be said that a system and its environ-
ment co-evolves, with each adapting to the other. Co-
evolution means that the evolution of one system is par-
tially dependent on the evolution of other related systems,
and that change in one system also changes the context
of the other(s). Diversity is the state or quality of being
different. The diversity of the system’s parts spreads into
the rest of the system as a result of interdependencies. It
can also be said that diversity is the prerequisite source
for unpredictable self-organizing and the emergence of
novelty. Trust, in turn, is needed for connecting diverse
actors. Trust can be seen as a decision through which one
can reduce the complexity emerging from the self-orga-
nizing interaction processes.
The next section will concentrate on the implications
of complexity thinking for innovation in a welfare ser-
vices system. However, because of the limited scope of
this paper, the focus will only be on some aspects of the
complexity i.e., those aspects which can be supposed to
play an important role in coping with the uncertainty of
the innovation process.
5. Results and Discussion: Enabling
Innovation in Welfare Services
5.1. Creating Trust
Trust is generally regarded as one of the most important
forces that hold modern societies and their subsystems
together [72,88]. Metaphorically, it is a social adhesive
that gets things going effectively. Th e function of trust is
to balance risk and contingency related to social interac-
tion, and to reduce uncertainty and ambiguity related to
the environment and the future. It is said that trust com-
pensates for lack of knowledge.
Trust plays a crucial role also in the con text of innova-

Enabling Innovation in Complex Welfare Service Systems409
tion in the welfare service system. The interviewees con-
firmed that trust helps to build up space for creativity
innovation, and encourages people to “see things differ-
ently”. A mutual trust between the people was assessed
as a prerequisite for introducing new ideas. One indica-
tive comment was that “...new ideas are often generated
when someone discovers the problem. If you can trust
that you are not in trouble when you report problems, it
could encourage more innovation”. It can be said that
trust enables playing with ideas [89]. However, focusing
only on the trust b etween people (personal tru st) is insuf-
ficient. In complex welfare service system, it is important
that there is also trust for the system. Luhmann [90] re-
fers this kind of system trust as confidence. Confidence
(system trust) is based on the idea that “social reality is
not only dependent on persons but also on functional
systems” [88]. The importance of systemic trust is also
revealed in the following quotation: “...service providers
do not always bring out the problems involved with ser-
vice provision because they fear that it worsens their
position in the negotiations with the Social Services De-
partment. ...it is this uncertainty or lack of confidence
that pulls the rug from under the development of new
ways of action”. In order to act within systems people
must have general confidence in their functions. Hence,
system trust implies, for example, that the new ideas are
given every chance to succeed.
Our results support earlier findings of the meaning of
trust in innovation [2,5,43]. What is important is that
personal and system trust not only reduces complexity
and makes up for obscurity caused by imperfect knowl-
edge but also increases certainty, because certainty does
not call for correct and certain knowledge but rather the
fact that the actors can predict each other’s behaviour
[88]. We propose, therefore, that trust increases the wel-
fare service system’s ability to take risks and stand fail-
ures. An atmosphere of trust lowers the mental threshold
that suppresses thinking that differs from conventional.
In brief, trust supports coping with the uncertainty of
innovation.
5.2. Increasing Communication Responsiveness
Trust is also needed when new ideas are leading into
wrong direction and the course must be revised. This
necessitates that ideas can be questioned and compared,
as well as that actors are, when necessary, ready to re-
linquish their restrictive frames of reference [91]. Instead
of seeking “one truth”, the welfare domain is full of wi-
cked problems which need to be addressed from the mul-
tiple perspectives. The majority of the interviewees
stressed that in order to change existing practices or ser-
vices, the goals, consequences and constraints of these
changes need to be discussed openly in a collaborative
environment. The following quotation about the signifi-
cance of collaboration is quite representative: “…if you
want real partnership, I mean not just rhetoric on part-
nership, the service delivery should be considered in
open and dialogic conversations between service pro-
viders and the Social Services Department... dictates do
not lead to best outcomes”. According to interviews, the
most important feature of “open discussion” is respon-
siveness. By responsiveness the interviewees refer to
reciprocal communication and feedback processes where
actors of the system co-create relationships that “evoke
potential in a trusting environment” [92]. Responsive
communication processes create trust, which in turn, can
increase the welfare service system’s capacity to renew
itself and generate new services.
In true life, “openness” of the responsive discussion is
always a relative concept. This is because responsive
processes are simultaneously both cooperative—compe-
titive in nature [70]. While some subjects can be dis-
cussed relatively openly in the welfare service system,
there remain always issues which are limited to certain
actors. This becomes clear in arguments that stress that
cooperation between the service providers is difficult
because they are each other’s competitors: “The cruel
fact is that we [private sector service providers] compete
to get the contract with the Social Services Department”.
This coincides, for example, with the results by Aasen
[47], who has stated that participants in innovation proc-
esses quite commonly express that they experience a
mutual lack of interest.
Whether cooperative or competitive, however, the mo-
st important aspect of these responsive processes is that
they have potential to produ ce po sitive emergen ce, which,
as earlier mentioned, can lead to innovation. As Stacey
[70] writes “novel organizational developments, good or
bad, are caused by the cooperative-competitive interac-
tion” which enables and constraints “the creative-destru-
ctive processes of organizational development”. The po-
tentiality for “co-opetition” (i.e. collaborative arrange-
ments between two or more competitors while simulta-
neously competing with each other, cf. [93]), was also
identified by the interviewees. A typical commen t related
to the co-opetition issue was: “it is not reasonable to
regard other service providers just as rivals...sometimes
the most valuable innovation impulses come from
them ...therefore, it is important to seek informal settings
where you can meet and exchange thoughts with col-
leagues from outside your own organization.”
Adapting Stacey [70] we argue that innovations are
rooted in the interplay of cooperative—competition in-
tentions of actors. Furthermore, we propose that instead
on imposing innovation from the “centre of the welfare
service system”, innovation should let emerge from the

Enabling Innovation in Complex Welfare Service Systems
410
“periphery of the welfare service system” [2]. Therefore,
the task of innovation management in th e welfare service
system is not to control actors, but facilitate responsive
self-organizing processes, which in the words of Schön
[86] include “detecting significant shifts at the periphery,
paying explicit attention to the emergence of ideas in
good currency, and deriving themes of policy by induc-
tion”. Furthermore, we argue for the importance of posi-
tive feedback that amplifies changes by reinforcing the
direction of the change [29].
5.3. Utilising Connectivity and
Interdependencies
Responsive communication processes multiply the con-
nectivity and interd ependency of elements within the we-
lfare service system and between the system and its en-
vironment. At best, the welfare service system co-evol-
ves with other systems. However, according to interviews,
this can imply a conflict of interests between two or more
entities. At worst, due the dynamics of the connectivity
and interdependencies, a micro-scale conflict interest may
escalate into a macro-scale phenomenon that threatens
the capacity of the welfare service system. The system
may become blocked [72]. The following quotation re-
flects the thoughts of many interviewees: “We don’t op-
erate very well on the system level. There are a lot of
administrative hurdles between the social services and
the health care services... especially in elderly care...
These hurdles hinder the development of customer-o-
riented services... ...sometimes we forget that the cus-
tomers’ problems don’t follow the logic of administra-
tion.” Moreover, the interviewees reported that the re-
sponsive processes may have negative side effects. That
is to say, the responsive co mmunication en tails a risk that
increases uncertainty. Because individuals often evaluate
new information on the basis of th eir existing knowledge
and mental models, this may lead to a culture where new
information is considered more of a threat than a possi-
bility and where ideas that contrast with the existing
power structure are rejected [94]. Adapting Gales and
Mansour-Cole [95], the situation can be described as a
paradox: in seeking to reduce uncertainty, the actors en-
gage in relationships with other, which, in turn, increases
the social and political uncertainty of innovation.
The majority of the interviewed representatives of the
private service providers agreed with the respondent who
claimed that “...it is not easy to talk about new ideas...it
seems that they [the Social Service Department] just po-
litely listen to what we tell them...too often ideas remain
ideas...ideas don’t proceed to the implementation sta-
ge...there is some kind of cultural stickiness.” It is im-
portant to notice that, in light of the interviews, it is not
only the Social Services Department that has been ac-
cused of being “immune” to new ideas. The following
quote typifies the view of several office holders: “Some-
times we ask service providers to in troduce new ideas on
how to meet the changing needs of citizens. I think it is
reasonable to expect that service providers with the best
experience in the field could think about services from
the new perspectives and develop new kinds of servi-
ces...However, we have found that there are service pro-
viders that are not very agile...it seems like they miss the
old good days and don’t want to see the reality of what
happened.” The problems related to the use of informa-
tion in the innovation process can be understood by the
concept of information stickiness [96]. Information sti-
ckiness is a result of costs related to the acquisition,
transfer and use of information compared to the value or
benefit of the information sought [94]. Due the stickiness,
information seekers (office holders/representatives of se-
rvice providers) and information providers (office hold-
ers/representatives of service providers) do not encounter
each other in a way that they are able come to new in-
sights that were not available based on information from
one source. This kind of thinking can be traced back to the
philosopher Francis Bacon (1853), who expressed that
“the human understanding, from its peculiar nature, easi-
ly supposes a greater degree of order and equality in things
than it really finds. When any proposition has been laid
down, the human understanding forces everything else to
add fresh support an d confirmatio n” [3 5]. In othe r words,
people’s information behaviour is biased towards con-
firmation and verification. Pointedly, we see what we
want to see.
In complexity thinking, however, connectivity and in-
terdependency have special role. Luhmann [72], for ex-
ample, has pointed out that connectivity and interdepen-
dency are essential for the system’s evolution. Mitleton-
Kelly [26] has emphasized similarly, and added that “it is
the degree of conn ectivity which determines the network
of relationships and the transfer of information and know-
ledge”. Connectivity and interdependence can be seen as
a counterforce for the confirmation-biased information
behaviour. In the context of innovation management, the
potentiality of conn ectivity and interdependencies can be
explained by the concepts of “strong” and “weak” ties [97].
Strong ties manifest themselves as relationships between
individuals or groups that regard each other as similar,
which are characterised by a commitment in time, often
emotional attachment and intimacy. Weak ties, on the
other hand, refer to relationships that connect individuals
and groups that usually operate in various social envi-
ronments. Given that innovation is typically an informa-
tion-intensive activity [98], we argue that both types of
ties are needed in transmission of knowledge in innova-
tion process. The main benefit of different ties is that

Enabling Innovation in Complex Welfare Service Systems411
they provide access to knowledge spillovers [98]. Weak
ties enable a varied knowledge base, whereas strong ties
promote distribution of knowledge particularly in situa-
tions where the knowledge is complicated and context-
bound [99]. In other words, weak ties improve the wel-
fare service systems’ ability to see things “in a new light”,
whereas strong ties su pport to convert seeing into “doing
differently”. Moreover, weak and strong ties increase in-
formation redundancy of the welfare service system. In-
formation redundancy is important for innovation, be-
cause it means “the use of more elements than necessary
to maintain the performance of the system in the event of
failure of one or more of the elements” [100]. In other
words, information redundancy decreases the fear of fai-
lure, which, as mentioned before, is the one of the main
obstacle for innovation.
5.4. Pursuing Diversity
As mentioned earlier, innovation implies uncertainty,
equivocality, and risk of failure. Uncertainty arises from
a lack of information across time and from information
asymmetry across space [55], whereas equivocality refers
to existence of multiple and conflicting interpretations
[56]. Due to information uncertainty and equivocality,
people prefer “risk aversion”, which mean that they take
risks on the basis of known rather than unknown prob-
abilities [43]. This kind of bias for “playing safe” [43]
may be disastrous in the decision domains around inno-
vation.
Risk-avoiding, fear of failure, and information prob-
lems were reported to be barriers for innovation also by
the interviewees of this paper as mentioned before in the
context of trust. Risk-avoiding, fear of failure and infor-
mation problems constituted mental constraints that en-
couraged people towards behaviour of doing nothing.
This finding is consistent with the results of previous
research, which conclude that the fact that the usefulness
of innovation cannot be known a priori may induce pub-
lic organizations toward playing safe and away from un-
certainty and experimentation [2,5,43].
One conceivable approach to the syndromes of “doing
nothing” and “playing safe” is to increase the diversity of
actors involved in innovation seeking. This argument can
be based on the principle of “requisite variety” [101]. A
requisite variety refers to a state where systems’ internal
variety is sufficient to match the environmental variety.
The greater the diversity of the welfare service system,
the more fit it is [101]. Diversity is a resource that en-
ables to handle uncertainty and ambiquity. Increasing
diversity can not only bring new perspectives but also re-
lieve pressures towards conformity, and encourage par-
ticipation from different actors [29], which, in turn, th-
rough feedba ck loop s an d inter d ep en d enc ies, impr ove th e
system’s ability to innovate in the longer term—i.e., see-
ing things in a new light. The vast majority of the inter-
viewees deemed diversity an essential aspect of the value
network of the Social Services Department of the City of
Helsinki. A typical statement was as follows: “Diversity
is important because the needs of the clients are var-
ied…it is not possible to develop new services without
understanding the various needs, and getting under-
standing requires knowledge that is dispersed between
different actors.”
Two mechanisms for increasing the diversity of the
welfares service system were identified in the interviews.
Firstly, most of the interviewees saw that the various
needs of the customers can be met by giving them more
freedom of choice and responsibility in purchasing wel-
fare services. Many interviewees agreed with the re-
spondent who claimed that “...service vouchers can put
pressure on the service providers to innovate new kinds
of services. They increase the system’s diversity and en-
courage service providers to develop services that meet the
citizens’ various needs… Often it is more efficient when
the customer is a citizen than when the customer is the
Social Services Department”. This kind of reasoning is
compatible with the current thinking of policymakers.
Burwick & Kirby [102], for example, have noted that
service vouchers may increase competition between ser-
vice providers, which, in turn, may promote diversifica-
tion of services and improvements in service quality as
providers seek to be responsive to the citizens’ needs and
distinguish the mselves in order to attract voucher hol ders.
Secondly, the interviewees were concerned about the
system’s ability to absorb ideas developed on the peri-
phery or outside the welfare service system. A typical
comment was as follows: “There is no forum where you
could express your ideas…many service providers de-
velop small-scale innovations that may also have value
for others, but these innovations too often remain hidden
and unacknowledged”. Based on the interviews, it seems
that organizations in the welfare service system face the
obstacle of the “not-invented-here” (NIH) syndrome that
causes resistance to innovative ideas developed else-
where [103]. In order to avoid the NIH syndrome, the
interviewees recognized the need to be more open to new
ideas. This became clear in comments like this one: “the
Social Services Department does not actively collect
ideas…I think the innovation potential remains unreal-
ized because the Department does not systemically col-
lect and analyze the best practices from the field…this
system needs “instrument” that will ensure the dissemi-
nation of new ideas.” One practical mechanism for avoi-
ding the NIH syndrome is “boundary spanning”. This
means a loose combination of different functions, duties,
processes and roles that are used by the actors who try to

Enabling Innovation in Complex Welfare Service Systems
412
guide their interaction in a direction th at produces results
[21,104]. Boundary spanners act as kinds of information
filters, thus regulating the flows of information that both
come into the system from the environment and go out of
the system. In addition to their regulating duties, the
boundary spanners function as knowledge interpreters by
changing information into forms others can understand
[104]. The boundary spanners and the interface elements
can be perceived as procedures that have a practical in-
fluence that promotes the innovativeness of the welfare
service system. They ensure that the welfare service sys-
tem not only has clearly expressed rules and guidelines
but also openness to new ideas and influences, and a
willingness to change old patterns.
6. Innovation Enabling Factors from the
Governance Paradigm
The interaction processes are based on many social and
functional factors [105]. The operating culture gives a
structure and framework to the interaction process, while
the social factors have a significant impact on the par-
ticipation and commitment of the actors. It can be said
that the interaction processes can be promoted or delayed
by many social/functional factors.
One can claim that the innovation enabling factors
(trust, responsive communication processes, connectivity,
interdependencies and diversity) identified in this paper
do not offer anything that had not been known before. It
is true that there already is a wide consensus on these
(and many related) factors. Enabling factors can be lin-
ked to many topical discussions concerning public sector
management. One of these is the viewpoint of govern-
ance. Referring to our research topic of innovation, “go-
vernance” can identify these processes, and interdepen-
dency and collectivity between actors around innovation
actions [106,107]. The governance perspective starts
from the diversity, dynamics and complexity of the so-
cieties to be governed [108]. Continuing interaction among
the actors is essential in complex operative environments
[109]. Public administration must be able to manage dif-
ferent networks, and this kind of new structure also in-
volves critical observation concerning traditional ways of
action. Referring to our empirical material, the viewpoint
of innovation processes is the central one nstead of no-
ticing only the results, it is important to examine the ways
of the processes. So, which factors are promoting differ-
rent solutions in innovation actions, and why? As previ-
ously mentioned, interaction processes are based on
many social and functional factors. Furthermore, when
dealing with social services, many political and ideo-
logical dissonances exist. From the perspective of gov-
ernance, practices between administration and politics
can be examined, as well as different power dependen-
cies between the institutions participating in collective
actions.
With this empirical context we argue that managing a
value network should be based on governance thinking
more than before. Managing with a strong hierarchy and
bureaucracy is not the right way to manage decentralized
service prod u ction netw o rks, or innovat ion acti ons wit hin
them.
In the context of the examined value network, a few
remarks can be adduced from the viewpoint of govern-
ance: 1) managing a value network and innovations needs
more governance thinking than hierarchical mechanisms
towards the managing of a decentralized service produc-
tion; 2) more instruments for network governance are
needed—e.g. managing complex relations between dif-
ferent actors, utilizing the different interaction and de-
pendencies of relations between actors, coordinating dif-
ferent interests, creating coopera tive fo ru ms, and cr eating
more concrete structures and steering mechanisms for
that cooperation; 3) coordination of common strategic
actions within the network; 4) enabling common trust,
understanding and a “culture of know-how” in service
production; 5) considering the nature of the value net-
work—currently, is that ideal (like “ecosystem”) one that
includes actors with common aims and purposes or is it
only an administrative network? Furthermore, we think
that this kind of governance thinking will give new in-
struments and viewpoints for innovation management as
well. As we have mentioned earlier, enabling innov ations
in a complex system is based on utilizing the interaction s,
interdependencies and diversity of different actors as we-
ll as possible.
7. Conclusions
This paper has explored the potential for innovation in a
complex welfare service system. Using the complexity
lens, the first part of the paper discussed the nature of in-
novation and the special characteristics of innovation in a
welfare services context. Innovation was defined as e-
merging novelty in action in a state of uncertainty. De-
spite the fact that there is a clear need for innovation in
welfare services, the paper argues that, due to the low
tolerance of risk-taking and failure, the public sector
faces an innovation deficit. Attempts have been made to
meet this deficit through co-operation between public
and private organizations. However, while such co-ope-
ration has increased the potential for innovation, it should
be noted that it has also created complex welfare service
systems that are difficult to manage. Emergence due to
the connectivity and diversity of the system’s parts, the
wicked na ture of th e iss ues in the w elf ar e domain and th e
complexity of the objectives and values in the public
sector were seen as factors that complicate the manage-

Enabling Innovation in Complex Welfare Service Systems413
ment of innovation in a welfare service system. The first
part of the paper implies that coping with the uncertainty
of innovation necessitates that the focus should be on the
complex relationships between the actors within the wel-
fare service system and between the system and its envi-
ronment.
The second part of the paper consists of empirical fin-
dings that show that the interaction processes have po-
tential that can be translated into a resource for improv-
ing innovation performance in welfare services. An illu s-
trative empirical case was the value network of the Social
Services Department of the City of Helsinki, which was
defined as complex for three reasons: it is an emergent
whole that has arisen out of the interactions and interde-
pendencies between its elements; innovation in the wel-
fare domain is coping with ‘wicked’ issues in the sense
that the best solutions to problems are difficult (or im-
possible) to achieve; and there is a complexity of objec-
tives and values in the welfare domain, particularly dif-
ferences in the objectives and values between the public
and the private organizations.
Despite the usefulness of the governance paradigm, we
think that what is missed or underestimated in traditional
governance research related to innovation is the emerg-
ing nature of innovation [47]. It is important to note that
we do not claim that an emergence is the result of pro-
cess of pure self-organization. Instead of claiming that
innovations “simply happen” or “bubble up”, we believe
that new order, i.e. innovation, is more appropriately
constructed rather than self-organized as such [80,110].
Adapting Hazy et al. [80] we think that innovation re-
quires constant support. The “success” of innovation in
welfare services depends much on the attention that ac-
tors bring to the innovation process. This paper argues
that paying attention to trust, responsive communication
processes, connectivity, interdependencies, and diversity,
it is possible to create favourable conditions for innova-
tions in complex welfare systems.
The main contribution of this paper is that complexity
thinking although it does not comprise a single unified
theory is a valuable approach since it offers concepts
with which to understand the complex processes of in-
novation in a state of uncertainty. It helps to understand
the coexistence of disorder and order the basic dynamics
of innovation and the constant transformations from one
to the other [69]. In particular, it is useful in the context
of the welfare services domain, where the issues are
complex by nature because they are social construction
processes, because multiple variables affect them and
because they are interdependent, subjective and dynamic
[69]. Furthermore, seen through the complexity lens,
innovation need not only be conceptualized as coping
with uncertainty but also as utilizing it. That is to say that
the failures always inherent in innovation are not seen as
a bad thing, but as a necessary part of the process that
produces emergence. As discussed in section five, many
enabling factors—e.g. connectivity and interdependen-
cies, and diversity have their “hidden sides”, i.e. they
may create disorder in the welfare system. In a sense, the
complexity lens makes these “hidden sides” visible and
integral elements of innovation. Diversity of actors, for
example, potentially increases the diversity of ideas,
which, in turn, may yield to redundant diversity a state
that Fonseca [46] calls “misunderstanding”. Although
misunderstanding increases uncertainty, it can be seen as
a positive situation. From the complexity point of view,
misunderstanding is an example of disorder a necessary
condition for the process of self-organization. However,
as Morcöl [69], among others, has pointed out, not all
service systems are equally self-organizational. Whether
uncertainty and disorder in innovation processes act as an
engine or as a brake depends on the system’s self-orga-
nizational capacities. This has been the focus in this pa-
per. We argue that the identified en abling factors are im-
portant in improving welfare systems’ abilities to inno-
vate.
Paradoxically, the strength and the weakness of com-
plexity thinking are two sides of the same coin. While
complexity thinking challenges the human tendency to
simplify [69] and change the questions to be asked and
answers to be discovered [31], it is, in the words of Pol-
litts [78], simultaneously “a theory about almost every-
thing, rather than a theory about some specific sector,
process or problem”. Depending on the point of view,
complexity thinking can be seen as fruitful or frivolous.
Despite the limitations of complexity thinking, this
paper has identified some research implications. In this
way, this paper can be understood as a “springboard” for
further theoretical and empirical research. It should be
pointed out that complexity thinking implies important
epistemological implications. While agreeing with Pol-
litts [78] critique that complexity thinking does not con-
stitute a universal law from which specific hypotheses of
causal relations can be extracted and tested, we argue
that complexity thinking can be used to study the dy-
namic interrelatedness of the parts of complex systems,
e.g. public-private welfare systems. On the one hand this
means that instead of building a deductive-nomological
model, complexity-oriented research is motivated by un-
derstanding properties of particular systems. On the other
hand, it means that generalizations inspired by complex-
ity thinking are context-dependent. This argument is
based on thoughts of Flyvbjerg [111], who has pointed
that because the objects of the social sciences are “self-
reflecting humans”, who are not only interpreted by re-
searchers but also actors who are interpreted as “back”

Enabling Innovation in Complex Welfare Service Systems
414
researchers, the result is that the social scientific knowl-
edge is contextual. However, despite the epistemological
constraints, there are plenty of research possibilities in
which the complexity lens would be a valuable approach.
One avenue for future research could be to get a deeper
understanding of why some organizations are able to be
more responsive to evolving innovations than others. In
order to answer this question, we suggest elaborating the
consequences the conventional management and admin-
istrative activities may have on innovation in complex
welfare service systems. Research questions could in-
clude: how goal setting, planning, monitoring and con-
trolling affect processes intended to lead to innovation,
and, at the same time, how such activities function as
constraints and enablers for evolving innovations. From
the complexity perspective, conventional management
and administrative activities such as goal setting, plan-
ning, monitoring and controlling are paradoxical. They
are paradoxical because they are used to bring ‘order’ to
the innovation process, but, in doing so, they bring down
the possibility of self-organizatio n and emergence, which,
in turn, are seen as key characteristics of innovation. It
would be also useful to study the role of power in inno-
vation in the complex welfare domain. In that case, one
interesting research problem could be how power simul-
taneously works as an enabling and a confining structure
for innovation.
This paper has managerial implications too. Based on
the literature and the interviews carried out, we claim
that there are signals sugg esting that complexity thinking
may give new insight on innovation management in
complex public-private networks. One of the most im-
portant issues linked to innovation management is ac-
ceptance of the paradox of “being in charge but not in
control” [112]. Instead of equating management with the
elimination of uncertain ty related to the innov ation proc-
esses, management should be seen as consisting of ac-
tivities that have effects on ongoing interactio n processes
within a complex welfare service system. These effects
can be anticipated, but not fully known. One practical
context in which the findings of this paper can probably
be used is when the objective is to improve the innova-
tiveness in contracting practices. This suggestion can be
rationalized by the findings of Brown et al. [113], who
have shown that discussion of the contracting out prac-
tices illustrates the tendency to simplify complex pub-
lic-private relationship s. According to Brown et al. [113],
contracting can be divided into two categories: simple
and complex contracting. While there are many situa-
tions where the process of contracting rules can and
should be kept as simple as possible (as in case of copy-
ing machines), there are also more complex situations
where simple rules cannot apply. This is the case in the
welfare service domain, notably in social and health ser-
vices. In striving for innovative contracting, new man-
agement approaches are needed. Adapting Fonseca [46],
Stacey [114] and Aasen [47], we suggest that managing
innovation in complex welfare service systems requires
the ability to articulate emerging themes, to withstand co -
opetition states of diversity, to acknowledge the bounda-
ries of rational thinking and resist the urge to rapidly draw
conclusions, and reflect on one’s own behaviour and its
consequences.
Finally, it is important to note that the framework pre-
sented in this paper is indicative in nature. Obviously,
further research should be carried out to validate the
framework.
8. Acknowledgements
This article has been written as a part of a two-year re-
search project studying the management of the value
network of social services in the City of Helsinki, Fin-
land. The project is funded primarily by The Finnish Wo-
rk Environment Fund. Authors appreciate comments and
suggestions for improvements by Dr. Ilpo Laitinen and
Dr. Kim Aarva from the City of Helsinki and Prof. Antti
Lönnqvist and Dr. Harri Laihonen from Tampere Uni-
versity of Technology on drafts of this article.
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