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The understanding of knowledge creation in state-owned enterprises (SOEs) is a rising issue in the academic debate and in the political agenda; still, there is a lack of a comprehensive theory despite the number of research published so far. This paper offers a novel theoretical framework for knowledge creation in SOEs by the study of innovation in SOEs from the perspective of the theory of the entrepreneurial firm and the theory of knowledge management, which together provide new insights that explain the factors that enable innovation in SOEs. These factors are managerial autonomy and government coordination. The theoretical development is important because considers SOEs as both firms and public entities, a double nature that combines the advantages of state-ownership and corporate governance. The theoretical contribution provides support to the increasing academic attention on the entrepreneurial …