The public sector is facing an equation that cannot be solved by continuing doing business as usual. External demands of availability, quality and resilience of services, as well as internal demands of resource efficiency, are putting pressure on the public sector to seek for innovation. In this study, we focus on local government innovation where high expectations are set on better utilisation of employees’ creativity and innovative capacity. Based on a qualitative case study of an innovation programme in a Swedish local government organisation, this study applies institutional theory as a theoretical lens to further investigate and analyse the relationship between formal and informal structures of local government innovation. The institutional structures related to norms and values, legitimacy and decoupling as well as digital artefacts as institutional carriers are discussed. Implications for practice show that formal structures, processes and digital artefacts to support local government innovation are important in this work. However, to achieve government innovation, equal attention should also be given to informal institutional structures of innovation. For research, this implies that government innovation studies can benefit from an institutional theory perspective to develop a better understanding of how informal structures affect related processes. We conclude by arguing that the needed change towards the innovative bureaucracy is a transformative innovation in itself that needs to be acknowledged.