Abstract
In this article (the second part of a two-part study) the focus is on establishing a theoretical framework of state owned enterprise (SOE) managers’ espoused theory of building blocks of innovation. A qualitative approach, namely Grounded Theory, supported by Theoretical Sampling, was applied in generating the primary data for the study from different management levels in the SOE. The managers’ espoused theory, based on empirical evidence, shows that innovation consisted of five important building blocks, namely contextual setting; strategic enablers; business enablers; foundational enablers; and human resources; each with its own categories and sub-categories. The study also identified barriers to innovation. An innovation diffusion framework, specifically for implementation in a government context, was proposed.