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This article focuses on the differences in managerial goals and motivation between private and public sectors. Some observers have concluded from this that private enterprise is ruthless and short-run profit oriented and/or that state-owned business firms suffer from inherent lethargy and inefficiency. A crucial assumption underlying this hypothesis is that investment projects in both sectors have been well conceived and found to be economically viable and sound. If this basic assumption is invalid, then, even the most competent management will be ineffective in making a success of such enterprises. There are three major explanations for the discouraging performance of many public sector enterprises in India. First, it is argued that there is no built-in profit motive in a public enterprise. Second, a number of observers, including government leaders, maintain that the poor performance of the public sector reflects the inevitable problems of the initial stage of growth of any organization. Third, several critics have pointed out that a major reason for the inefficiency and low profit levels of the public enterprises is the overcentralization of decision-making authority in organizations.