Governments are increasingly implementing public sector innovation laboratories (PSI-Labs) to support public innovation. Although most of these Labs use design approaches to drive innovation, previous research shows that the impact of such approaches is limited. This is due to the lack of integration of design with policy processes and power structures, the weak legitimacy that design knowledge has as a source of policy evidence and the incapacity of design to turn the public sector's politico-organisational factors into matters of design.

This design research project aimed to further understand the value of design in Public Sector Innovation and to clarify the role it can play in the different levels of government transformation when introduced and integrated into the politico-organisational context of a new PSI-Lab.

Through a process of ‘action research through design’, this project shows how design was used as a core capability to create, implement and operate a new PSI-Lab at the highest levels of central government. Through the reflections from the process of practice, strengthened by a qualitative study of the case, this thesis explains how design was effectively introduced and integrated into the politicoorganisational context and policy cycle of this new PSI-Lab, helping to increasing its impact and scale.

This research demonstrates that integrating design into the politico-organisational context of PSI is possible when: (1) design is practised as an attitude of turning these factors into matters of design; (2) the practices of design and politics are intertwined in building legitimacy and social capital; and (3) policycycles are understood as adaptive and dynamic such that policy design and implementation are practised as two interdependent and experimental activities.

Once the barriers of integration had been overcome, the study shows that this specific PSI-Lab was able to scale design as an innovation capability across a broader spectrum of the public sector, helping to reposition design in public sector innovation research and practice as an open, flexible and integrative approach to deal with public problems. Finally, this study offers a body of knowledge from practice on how to design and implement a PSI-Lab in a large public sector system.