The construction industry faces urgent and multifaceted challenges, from ensuring a future-proof and sustainable built environment to maintaining infrastructure safety and addressing resource scarcity. Innovation is widely recognised as essential to overcoming these obstacles. Yet, despite favourable conditions and intentions, public agencies (the sector’s commissioning clients, regulators, and facilitators) frequently struggle to translate innovative potential into tangible outcomes. This phenomenon, termed the ‘public construction innovation paradox,’ forms the central problem addressed in this dissertation.

This research investigates how public agencies operating in the construction industry can effectively govern innovation processes to increase public value creation. Deploying a pragmatic, process-oriented research approach, empirical work was conducted in partnership with the Province of Noord-Holland, with findings iteratively refined through practitioner engagement.

A central contribution is the articulation of the Triple-A innovation capabilities framework, comprising absorptive, adoptive, and adaptive capabilities. These capabilities are not static attributes but must be actively developed at the individual, team, and organisational levels. The research demonstrates that the effective governance of innovation is inherently a multi-layered challenge, requiring distinct yet interconnected interventions across these levels.

To bridge the gap between ad hoc ‘tinkering’ and systemic change, the study foregrounds the importance of reflective practices. A bespoke serious game was developed and implemented, providing a structured yet engaging environment for teams to reflect on innovation challenges, share tacit knowledge, and co-create actionable strategies. The study advances both theory and practice by providing a layered framework for diagnosing and developing innovation capabilities, a practical tool for enhancing reflective practices, and actionable recommendations for public agencies. By investing in Triple-A capability development, embedding reflection routines, and weaving a robust organisational ‘fabric’, public agencies can better navigate the innovation paradox, accelerate transitions in the built environment, and increase their impact as agents of change.