This paper assesses some of the characteristics of the relationship between social innovation and the evolving digital economy. It is based on a study of several not-for-profit organisations, who, as part of their operation, have implemented Web 2.0 solutions utilising resources made available under the Victorian Government Innovation Statement (2008). While these 'collaborative internet innovation' projects were primarily funded to increase organisational productivity and economic activity, what makes them particularly interesting is their direct social innovation purpose using internet based communications technologies. The concept and practice of social innovation is gaining considerable attention in the face of increasing demands on government welfare expenditure. For some, innovation is needed to increase the productivity of (government) funded community service organisations. For others, the innovation process is focussed on seeking solutions to intractable social problems that do not ordinarily attract commercial or government responses. Utilising actual case studies, the paper argues that public policy for innovation and the digital economy needs to look beyond the confines of productivity in order to capture the full range of benefits available from investments in high capacity broadband.