An explanation for the low innovation activity in construction is put forward. The central argument is that the current theory of construction is one root cause for low innovation activity. Instead, an explicit and more powerful theory of construction is needed for further innovation, which is ‘to manage new ideas into good currency’. There are three main mechanisms in the current theory of construction which are identified as causing this hindrance. Firstly, production theories in general, as well as construction theories specifically, have been implicit. Therefore, it has not been possible to transfer radical managerial innovations, such as lean production, from manufacturing to construction at a theoretical level. Direct application of this production template to construction has been limited due to the different context of construction in comparison with manufacturing. Secondly, the current theoretical model of construction is based on the transformation model of production. It is argued that the principles of this model are counterproductive, because uncertainty and interdependence are abstracted away. This leads to fragmented and myopic management and inflated variability. Practical examples show that these deficiencies and related practical constraints hinder the implementation of top-down innovations. Thirdly, empirical research shows that also bottom-up innovations - systematic learning and problem solving - are being hindered by the current theory. Thus, the advancement of innovations in construction requires that a new, explicit and valid theory of construction is created, and business models and control methods are developed on the basis of that new theory.