Private companies should be encouraged to take over and run state schools as profit making enterprises under a "John Lewis-style" business model, a think tank has said.
A report from Policy Exchange argued the new schools, in which teachers and staff are encouraged to become shareholders, would create strong incentives to drive up standards.
Under the proposals, half of any profits made by the schools would be distributed as a dividend to its partners on an annual basis, while the remaining half would be reinvested.
The report, called Social Enterprise Schools, also suggests the schools operate outside the traditional structures which apply to teachers' pay and conditions.
It said: "Much of the opposition to private provision ignores that fact that profit making already exists in large parts of the state education system."
Policy Exchange argued that more school places would be created by the scheme, but acknowledged that "full-on" profit making in schools would be politically difficult to introduce immediately.
Instead it called for the government to pilot the social enterprise school model in the most deprived areas of the country to test its effectiveness.
The conservative think tank said private companies already provide education to vulnerable children with special needs and those who have been excluded from mainstream school, while half of all free nursery education is delivered by the private and voluntary sectors.
The report added: "Private companies have been involved in school improvement programmes for a number of years. The private sector also provides all kinds of services in schools. In 2009/10 school spending on 'other professional services' - IT, facilities management, catering - was £572million."
Policy Exchange said the pilot schools would have to operate under strict conditions and enrol at least 20% of students who are eligible for free school meals.
The operators would also only receive their share of the surplus if they meet performance targets and be tied to an "asset lock" which forbids them from selling school buildings or facilities procured by government for gain.
James Groves, head of education at Policy Exchange, said: "Given the huge challenges which our education system faces in the coming years, the government should continue to push the boundaries of the status quo.
"This report challenges the idea that there is simply a choice between for-profit and not-for profit schools.
"A 'John Lewis' model of school where private companies, including teachers and school staff are encouraged to personally invest offers one such innovative alternative."
Recent figures show that 64% of Free Schools in Sweden are operated by for-profit companies while 56% of Charter Schools in the US are managed by for-profit providers, according to Policy Exchange.