In order to enhance the effectiveness of social governance and accelerate economic development, this paper explores the role of diversified and inclusive policies introduced by local governments in service innovation and competitive performance, as well as their impact on improving local governance. From the perspective of social governance, several hypotheses are proposed, including: what role inclusive policies play in service innovation and competitive performance; Has diversification policy improved service innovation and competitive performance; Can the government's diversified and inclusive policies improve the social governance environment and enhance binding laws and regulations; Can service innovation and competitive performance provide conditions for social governance. The analysis results indicate that diversified and inclusive policies can effectively improve service innovation and competitive performance, and directly affect social governance. Inclusive and diverse policies can significantly improve service innovation and competitive performance, and drive them towards a positive direction. Service innovation and competitive performance are good conditions for social governance, providing support for the improvement of relevant laws and regulations. Therefore, the government should introduce diversified and inclusive policies to promote the development of service innovation and competitive performance, create a good external environment for social governance, and promote the improvement of relevant laws and regulations.