Governments face "a bit of a dilemma" on how to foster innovation, said Deputy Prime Minister Teo Chee Hean yesterday.

"Sometimes, it's because government is not very effective, that's why you have innovation because there's a lot of space to correct the deficiencies, service delivery and market failure," he said.

Ironically, good governance can mean less room for innovation, Mr Teo added. "When you have government which is very efficient and effective, then sometimes, there's not much space for that. There is a little bit of a dilemma there."

Mr Teo was responding to a question on whether governance was killing innovation during a question-and-answer session at the Stewardship Asia Roundtable, which was held at Shangri-La Hotel yesterday.

There is no formula on whether a government should do more or less, and solutions to foster innovation need to be tailored to different nations and circumstances, he said.

Recounting his experience speaking to venture capitalists from Singapore investing in China's booming digital economy, he said he was told that "the things you are doing in Singapore in innovation are no good in China" because China had a different set of problems.

Mr Teo said while Singapore was not "terribly good" at innovation, there were initiatives such as the National Research Foundation that can help ramp up the innovation space.

Civil Aviation Authority of Singapore chairman Lee Hsien Yang also had innovation on his mind. In a question to Mr Teo, he said the issue of "stewardship" had the connotation of continuity. He asked how the need for innovation and continuity, such as handing over companies in the same shape they had been in, could be balanced.

Mr Teo replied by elaborating on some of the Government's restructuring efforts. He cited NEWater, which grew out of two agencies in different ministries. The agencies were eventually brought together under the same roof to enable "innovations that go further".

More than 100 business leaders and political heavyweights, including former Cabinet minister S. Dhanabalan and former South Korean prime minister Han Seung Soo, attended the closed-door event yesterday, which was organised by Stewardship Asia Centre.

Established in December 2014, the centre is fully funded by a grant from Temasek Holdings.

Mr Ong Boon Hwee, the centre's chief executive, said the centre aims to promote the "values-based" concept of stewardship, which is not as well-discussed as corporate governance, which is "rules and compliance-based". The two concepts go hand in hand, he said.

Stewardship is the act of enhancing an organisation's capability to create economic and societal value over the long term, and encompasses the idea of responsibility.

Mr Ong said the importance of values was keenly discussed. It was also emphasised by Mr Teo, who told participants that the Public Service Commission "looks for values".

Mr Teo said: "One of the favourite things I look at when I look at candidates for scholarships is peer appraisal while they do their national service. It tells you a lot about people. It tells me a lot more than whether you got a few more marks here, or how stellar his resume is."