Public Innovation as ‘Reluctant Innovation’: The Case of Central Banks After the Global Financial Crisis

ABSTRACT What explains the crisis response of central banks? The case of central banking is seldom used in the broader field of public innovation and crisis management studies. This paper examines the crisis management of the European Central Bank and the Federal Reserve through two severe crises, to draw out insights about innovation processes that occur in the public sector. Drawing on contributions from crisis management, innovation, and organizational studies, this article proposes a new concept, “reluctant innovation,” to capture the meso‐level dynamics that occur in and around crisis‐managing organizations. At the macro level, a severe crisis creates an impetus for action, and within central banks at the more micro‐ level competing ideas about best policy solutions will influence policy outcomes. Yet the often‐neglected meso‐level, where the organization navigates its legal, political, and administrative context, will also impact both the content and the timing of policy innovation. Using public documents, media reports, and existing accounts of these two crises, I demonstrate how in both the Fed and the ECB case, there were instances in which interactions with and contestation around the legal, political, and administrative context had profound impacts on the crisis response and policy innovation of these central banks.