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Public Procurement of Innovation: Evidence from a German Legislative Reform

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  • Czarnitzki, Dirk
  • Hünermund, Paul
  • Moshgbar, Nima

Abstract

Using public procurement to promote private innovation activities has attracted increasing attention recently. Germany implemented a legal change in its procurement framework in 2009, which allowed government agencies to specify innovative aspects of procured products as selection criteria in calls for tender. We analyze a sample of 3410 German firms to investigate whether this reform stimulated innovation in the business sector. Across a wide range of specifications – OLS, nearest-neighbor matching, IV regressions and difference-in-differences – we find a robust and significant effect of innovation-directed public procurement on turnover with new products and services. At the same time, our results demonstrate that public procurement mainly stimulates innovations of more incremental nature rather than true market novelties.

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  • 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).
    • Handle: RePEc:eee:indorg:v:71:y:2020:i:c:s0167718720300436
    DOI: 10.1016/j.ijindorg.2020.102620
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    Cited by:

    1. Edler, Jakob, 2023. "Demand, public procurement and transformation," Discussion Papers "Innovation Systems and Policy Analysis" 79, Fraunhofer Institute for Systems and Innovation Research (ISI).
    2. Krieger, Bastian & Zipperer, Vera, 2022. "Does green public procurement trigger environmental innovations?," Research Policy, Elsevier, vol. 51(6).
    3. Cappelletti, Matilde & Giuffrida, Leonardo M., 2021. "Procuring survival," ZEW Discussion Papers 21-093, ZEW - Leibniz Centre for European Economic Research.
    4. 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).
    5. Naudé, Wim & Dimitri, Nicola, 2021. "Public Procurement and Innovation for Human-Centered Artificial Intelligence," IZA Discussion Papers 14021, Institute of Labor Economics (IZA).
    6. Rocsana Bucea-Manea-Țoniș & Oliva Maria Dourado Martins & Dragan Ilic & Mădălina Belous & Radu Bucea-Manea-Țoniș & Cezar Braicu & Violeta-Elena Simion, 2020. "Green and Sustainable Public Procurement—An Instrument for Nudging Consumer Behavior. A Case Study on Romanian Green Public Agriculture across Different Sectors of Activity," Sustainability, MDPI, vol. 13(1), pages 1-25, December.
    7. Blind, Knut & Krieger, Bastian & Pellens, Maikel, 2022. "The interplay between product innovation, publishing, patenting and developing standards," Research Policy, Elsevier, vol. 51(7).
    8. Chiappinelli, Olga & Giuffrida, Leonardo M. & Spagnolo, Giancarlo, 2023. "Public procurement as an innovation policy: Where do we stand?," ZEW Discussion Papers 23-002, ZEW - Leibniz Centre for European Economic Research.
    9. Dina Dardir, 2020. "Does the R&D Public Procurement Matter for High-Tech Exports? Evidence from the USA," Post-Print hal-04048942, HAL.

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    More about this item

    Keywords

    Public Procurement of Innovation; Public Procurement with Contracted Innovation; Innovation; Research and Development; Econometric Policy Evaluation;
    All these keywords.

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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