How does the structure of government-funded service networks affect the process of service innovation? This chapter is a comparative analysis of the structure and processes of collaborative innovation of two government-funded community-based elderly service networks in Shanghai. This chapter finds that in consistent with the literature a network that has a Network Administrative Organization structure is better able to manage the process of service innovation in a way that balances the need to achieve government policy goals on the one hand and the imperative to facilitate bottom-up citizen participation on the other. Surprisingly, contrary to what prior studies have suggested, this chapter finds that a network in which a lead organization plays a dominant role, despite its more centralized process of service innovation, is often able to deliver a variety of high-quality and low-cost services addressing citizens” needs. With the leadership provided by the network lead organization and its close affiliation with the street-office government, the network has been able to solicit government support. Such a hierarchical yet responsive state-society relation has emerged as a result of the coalescence of a corporatist state legacy and an increasing pressure for local governments to seek citizens” support in service delivery.