This paper deals with the issue of social innovation at the urban scale and the role played by local governance to promote a positive ecosystem for development. After presenting third sector organizations as traditional subjects of social innovation, the paper focuses on the emerging forms of social innovation in the case of Milan and the role played by its local government in supporting a favourable milieu for it. We will show the relational mechanisms used to produce emulation among sectors and the chain of interactions which allowed to promote a local strategy for inclusion and job creation. The innovative integration mode produced in Milan in-between welfare and economic development can be seen as a source of learning. Nonetheless, its effects are limited by the lack of an integrated institutional framework of multilevel governance and subsidiarity.
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