ABSTRACT
This chapter deals with the role of the state-owned enterprises (SOEs) in innovation processes. First, it reviews the literature that considers the economic role of SOEs and their increasing impact on innovation; and second, it discusses how SOEs effectively generate innovation. The aim is to overcome a conflicting debate about SOEs and highlight their innovative potential, which is under increasing attention due to SOEs’ activism in emerging countries. A newly developed theoretical framework is proposed on the basis of the theory of the firm and the theory of knowledge to shed light on the nature of innovation in SOEs. Then, it explores the conditions that make innovation in SOEs possible. Not all of them have been innovative, yet some have proved able to innovate. Finally, it suggests two fundamental conditions that allow SOEs to innovate: managerial autonomy and coordination with the government. The first refers to the internal managerial process, and the second to the capacity to interact with the innovation system.
