The literature on state-owned entity (SOE) reform has been focused on privatization. We however show that even in the absence of property rights, SOEs may significantly improve performance and document 42 Indian state-owned laboratories over 1993-2006 starting from a base of negligible U.S. patents, being granted more patents than all domestic private firms combined. Patent licensing revenue increases from 3% to 15% as a fraction of government budget without negatively affecting publication quality and quantity. This follows incentive policy change and leadership change at labs, an event whose timing is plausibly exogenous being dictated by government employment rules.

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