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Abstract
A growing literature in public management has identified the key role that innovation can play in enhancing agency efficiency, effectiveness, performance and legitimacy. However, considerably less is known about the actual sources of knowledge generating innovative activity in the public sector. This paper fills this crucial gap in the literature by explicitly analyzing the link between a key source of knowledge and ideas, universities, and the innovative activities of public organizations. By utilizing a new source of data, this paper is able to show that not only do universities play a key role in generating innovative activity in public organizations, but the nature of innovations and their impact on public sector performance are related to the role played by universities. The findings suggest that universities play a key role in generating innovative activity in public organizations as doing so can increase the quality of public services, employee job satisfaction, and interagency collaboration.