The main goal of this thesis is to identify barriers to innovation in the water industry and to highlight their importance in the innovation process. Water is essential for public health, environmental ecosystems and in general for a nation's social and economic well-being. Water systems are today increasingly facing immense sustainability challenges such as water scarcity, climate change, population growth and urbanization. In order to be able to address these challenges, innovative solutions and radical changes within the water industry are required. By contrast, water management is facing an innovation deficit, as the industry is widely characterized as being less innovative than other economic sectors. Possible reasons for this situation relate to the characteristics of the industry such as its strong exposure to the public sector, expensive and durable installations and major responsibility towards the general public (provision of drinking water, etc.). ^The identification of innovation barriers is a first step, which is essential in order to deal with these problems and attempt to overcome them. The innovation barriers have been identified during in-depth interviews with five water companies and are clustered along the three dimensions comprised by (i) external stakeholders, (ii) the organizational level and (iii) the individual level. Analysis has shown that especially for SMEs the most important barriers relate to the external stakeholder dimension, such as the access to funds, the customer characteristics, or the regulatory frameworks. In addition, it is essential to consider the fact that along with the technological dimension of innovative water products and services, there are also political, cultural, social and economic aspects that have to be taken into consideration. ^The future will involve the creation of innovation systems that incorporate different dimensions with the goal of increasing innovation within the water industry. More of the same will neither be economically efficient, nor socially acceptable. This is why innovation is essential to the future of urban water systems and to the water industry as a whole.