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The demand-pull effect of public procurement on innovation and industrial renewal

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  • Francesco Crespi
  • Dario Guarascio

Abstract

This article empirically analyzes the link between public procurement (PP) and innovation activities, by taking into account the moderating effect played by import penetration on PP. Using industry-level information on patent applications for 24 countries over the period 1995–2012, we test the impact of PP on innovation activities and whether and in which direction import penetration on PP impacts on patenting. The econometric analysis relies on Poisson regression techniques aiming to investigate the correlation between patent counts, supply- as well as demand-side determinants, and controlling for country and sector heterogeneity. The obtained results confirm our main hypotheses. The dynamics of patenting is positively affected by the PP, while a high degree of import penetration reduces the innovation enhancing effect exerted by public demand. Our results suggest that public demand may represent an effective tool for industrial policy to stimulate innovative activities, shape the transformation of production systems, and foster industrial renewal. Moreover, the empirical evidence shows that the strategy regarding the degree of openness in PP toward nondomestic firms is a crucial policy choice capable of affecting the innovative potential of public demand.

Suggested Citation

  • Francesco Crespi & Dario Guarascio, 2019. "The demand-pull effect of public procurement on innovation and industrial renewal," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 28(4), pages 793-815.
    • Handle: RePEc:oup:indcch:v:28:y:2019:i:4:p:793-815.
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    3. Tammi, Timo & Saastamoinen, Jani & Reijonen, Helen, 2020. "Public procurement as a vehicle of innovation – What does the inverted-U relationship between competition and innovativeness tell us?," Technological Forecasting and Social Change, Elsevier, vol. 153(C).
    4. Krahé, Max, 2023. "Italiens Stagnation verstehen," Papers 277907, Dezernat Zukunft - Institute for Macrofinance, Berlin.
    5. Matteo Deleidi & Claudia Fontanari & Santiago José Gahn, 2023. "Autonomous demand and technical change: exploring the Kaldor–Verdoorn law on a global level," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(1), pages 57-80, April.
    6. Caravella, Serenella & Crespi, Francesco & Cucignatto, Giacomo & Guarascio, Dario, 2023. "Technological Sovereignty and Strategic Dependencies: The case of the Photovoltaic Supply Chain," GLO Discussion Paper Series 1330, Global Labor Organization (GLO).
    7. Krieger, Bastian & Zipperer, Vera, 2022. "Does green public procurement trigger environmental innovations?," Research Policy, Elsevier, vol. 51(6).
    8. Castelnovo, Paolo & Clò, Stefano & Florio, Massimo, 2023. "A quasi-experimental design to assess the innovative impact of public procurement: An application to the Italian space industry," Technovation, Elsevier, vol. 121(C).
    9. Hafele, Jakob & Le Lannou, Laure-Alizée & Rochowicz, Nils & Kuhls, Sonia & Gräbner-Radkowitsch, Claudius, 2023. "Securing future-fit jobs in the green transformation: A policy framework for industrial policy," ZOE Discussion Papers 10, ZOE. institute for future-fit economies, Bonn.
    10. Dengler, Benedikt, 2018. "The WTO Government Procurement Agreement as a Commitment Device: A First Appraisal," CEPR Discussion Papers 13266, C.E.P.R. Discussion Papers.
    11. Naudé, Wim & Dimitri, Nicola, 2021. "Public Procurement and Innovation for Human-Centered Artificial Intelligence," IZA Discussion Papers 14021, Institute of Labor Economics (IZA).
    12. Dai, Xiaoyong & Li, Yanchao & Chen, Kaihua, 2021. "Direct demand-pull and indirect certification effects of public procurement for innovation," Technovation, Elsevier, vol. 101(C).
    13. Sandro Mendonca & Hugo Confraria & Manuel Mira Godinho, 2021. "Appropriating the returns of patent statistics: Take-up and development in the wake of Zvi Griliches," SPRU Working Paper Series 2021-07, SPRU - Science Policy Research Unit, University of Sussex Business School.
    14. Matteo Deleidi & Mariana Mazzucato, 2019. "Mission-Oriented Innovation Policies: A Theoretical And Empirical Assessment For The Us Economy," Departmental Working Papers of Economics - University 'Roma Tre' 0248, Department of Economics - University Roma Tre.
    15. Deleidi, Matteo & Mazzucato, Mariana, 2021. "Directed innovation policies and the supermultiplier: An empirical assessment of mission-oriented policies in the US economy," Research Policy, Elsevier, vol. 50(2).
    16. Czarnitzki, Dirk & Hünermund, Paul & Moshgbar, Nima, 2020. "Public Procurement of Innovation: Evidence from a German Legislative Reform," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    17. Caravella, Serenella & Crespi, Francesco & Guarascio, Dario & Tubiana, Matteo, 2020. "Competitive strategies, heterogeneous demand sources and firms’ growth trajectories," GLO Discussion Paper Series 442, Global Labor Organization (GLO).
    18. Serenella Caravella & Francesco Crespi, 2021. "The role of public procurement as innovation lever: evidence from Italian manufacturing firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 30(7), pages 663-684, October.
    19. Dario Guarascio & Jelena Reljic & Giacomo Cucignatto & Giuseppe Celi & Annamaria Simonazzi, 2023. "Between a rock and a hard place. Long-term drivers of EU structural vulnerability," Working Papers in Public Economics 237, University of Rome La Sapienza, Department of Economics and Law.
    20. Krahé, Max, 2023. "Understanding Italy's stagnation," Papers 277913, Dezernat Zukunft - Institute for Macrofinance, Berlin.

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    More about this item

    JEL classification:

    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other

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