In a modern innovative economy, one of the important functions and new missions of the stateowned enterprises (SOEs), as missionoriented enterprises in the public sector, is to replace and complement some of the functions of the government. As a policy toolkit of the state will to innovate, SOEs play three main roles: (1) as a powerful tool to break the dominant influence of vested interest groups and traditional thinking, SOEs promote the reform of the national innovation system; (2) SOEs play a major role in dealing with these major social and global challenges, such as energy transition, climate change, public health, income inequality and population aging; and (3) SOEs play an irreplaceable special role in the technological catchup of latedeveloping countries (e.g. China). This theory applies to large SOEs and to all knowledge and technologyintensive SOEs, regardless of size. The paper specifically discusses the important role of large SOEs as organizers and coordinators in building China's local innovation network and local innovation community; it suggests that SOEs should be used as a policy toolkit to change the unfavorable situation concerning the current “internal selfcirculation” of scientific research activities in universities and research institutes.
