I foresee there are 3 challenges for any government to innovate: the lifetime, the internal struggles and external influences. Firstly, as you may aware, any administration has a limited time. After an administration is over, vision is changed. Not to forget distraction during the end of the first term toward the second term. Many time, a government needs to reverse the previous government minute innovation in the first year of their administration.
Secondly, internal struggles come from within the administration, because the previous, previous previous, previous previous previous government put in-place. Any new initiative will have a struggle, slowness to execute. This could be due to limited infrastructure or wrongly applied infrastructure that requires more than 1 terms to improve. Worse, for some countries, many public servants who may disagree with the current administration can’t be dismissed from work.
Thirdly, external influences come from competing administrations, news reporters, social media and public. So, not only the government needs to function as an innovator, they also need to ensure the public opinion is aligned well with them. Otherwise, impeachment can come into play. Meanwhile, if we see from startup point-of-view, this external influences could be the primary challenge for them to overcome.