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Innovation on Demand: Can Public Procurement Drive Market Success of Innovations

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Author Info
Aschhoff, Birgit
Sofka, Wolfgang

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Abstract

Public procurement has been at the centre of recent discussions on innovation policy on both European and national levels (e.g., Aho-Report, Barcelona Strategy). It has a large potential to stimulate innovation since it accounts for 16% of combined EU-15 GDP. We embed public procurement for innovation into the broader framework of public policies to stimulate innovation: regulations, R&D subsidies and knowledge infrastructure (i.e. basic research at universities). We synthesize the characteristics of all four instruments based on existing literature and quantitatively compare their effects on innovation success. Our empirical investigation rests upon a survey of more than 1,100 innovative firms in Germany. Our survey puts us in the position to trace all sources of valuable innovation impulses, namely public customers, law and regulations, universities and public funding for R&D. We relate these sources back to innovation success. We find that (non-defense related) public procurement and knowledge spillovers from universities propel innovation success equally. In a second step, we explore whether these effects vary across firms (e.g. size, location, industry). The benefits of university knowledge apply uniformly to all firms. However, public procurement is especially effective for smaller firms in regions under economic stress as well as in distributive and technological services. Based on these findings targeted policy recommendations can be developed. --

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 08-052.

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Date of creation: 2008
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Handle: RePEc:zbw:zewdip:7375

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Related research
Keywords: Innovation policy; public procurement; comparison of instruments; innovation success;

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Find related papers by JEL classification:
C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models
H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy

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    Other versions:
  3. DUGUET Emmanuel, 2004. "Are R&D subsidies a substitute or a complement to privately funded R&D? Evidence from France using propensity score methods for non- experimental data," Public Economics 0411007, EconWPA. [Downloadable!]
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    Other versions:
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    Other versions:
  13. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier. [Downloadable!] (restricted)
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