This chapter provides a UK case study of public service reform to illustrate how a microfoundational base premised on instrumental rationality – in particular a principal-agent framework – can extensively influence policy towards innovation in the governance of public services. It also provides evidence of the failure of the New Labour Government's reform program in the context of relatively benign conditions and argues that the failure was to a substantial degree because of the inadequacies of the microfoundations that guided the reform program. The chapter concludes by discussing the circumstances when microfoundations are most likely to impact on policymaking. It argues for a greater awareness by policymakers of their microfoundational assumptions and for the advantage of developing policy in a manner that gives due recognition to the plurality of microfoundations commonly used in the social sciences.