To stay on top of global competition, firms and governments often need to acquire innovative goods and services, including ideas and research, from their strategic suppliers. A careful design of procurement policy is crucial to make potential suppliers generate and sell the most suitable innovation. Moreover, procurement by public agencies and large firms often set the incentives for the development of innovations economy-wide. In this paper, guided by recent micro- and macro-economic research, we discuss vices and virtues of the many ways to induce potential suppliers to create and sell innovations. We consider a menu of procurement methods and policies for best procuring new knowledge and innovative products, discussing their costs and benefits in different possible scenarios and suggesting criteria to choose among them. We explain how to optimize the degree of competition between suppliers, as well as other more practical indirect ways to stimulate innovation. We discuss the effects of standard setting activities by large, often public, procurers on innovation races. We evaluate how public and large private firm’s procurement may induce innovation and growth at the national, industry or supply network level by affecting input market prices and the returns to human capital formation. Finally, we point out how risk management methods used in procurement should be modified when innovation is a central concern for a buyer.
|Date of creation:||Jul 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- repec:oup:qjecon:v:119:y:2004:i:3:p:1049-1090 is not listed on IDEAS
- repec:tpr:qjecon:v:119:y:2004:i:3:p:1049-1090 is not listed on IDEAS
- Shavell, Steven & van Ypersele, Tanguy, 2001.
"Rewards versus Intellectual Property Rights,"
Journal of Law and Economics,
University of Chicago Press, vol. 44(2), pages 525-47, October.
- Steven Shavell & Tanguy van Ypersele, 1999. "Rewards versus Intellectual Property Rights," NBER Working Papers 6956, National Bureau of Economic Research, Inc.
- Shavell, S. & van Ypersele de Strihou, T.P.M.C., 1999. "Rewards versus intellectual property rights," Discussion Paper 1999-26, Tilburg University, Center for Economic Research.
- Yeon-Koo Che & Ian Gale, 2003.
"Optimal Design of Research Contests,"
American Economic Review,
American Economic Association, vol. 93(3), pages 646-671, June.
- Yeon-Koo Che & Ian Gale, 2000. "Optimal Design of Research Contests," Econometric Society World Congress 2000 Contributed Papers 1784, Econometric Society.
- Daron Acemoglu & Joshua Linn, 2003.
"Market Size in Innovation: Theory and Evidence From the Pharmaceutical Industry,"
NBER Working Papers
10038, National Bureau of Economic Research, Inc.
- Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," Levine's Working Paper Archive 228400000000000002, David K. Levine.
- Allen, Franklin & Gale, Douglas, 1998.
"Diversity of Opinion and Financing of New Technologies,"
98-29, C.V. Starr Center for Applied Economics, New York University.
- Allen, Franklin & Gale, Douglas, 1999. "Diversity of Opinion and Financing of New Technologies," Journal of Financial Intermediation, Elsevier, vol. 8(1-2), pages 68-89, January.
- Franklin Allen & Douglas Gale, 1999. "Diversity of Opinion and Financing of New Technologies," Center for Financial Institutions Working Papers 98-30, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Vives, Xavier, 2005.
"Innovation and Competitive Pressure,"
Department of Economics, Working Paper Series
qt1s1059vr, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Guido Cozzi & Giammario Impullitti, . "Technology Policy and Wage Inequality," Working Papers 2008_23, Business School - Economics, University of Glasgow, revised Oct 2006.
- repec:oup:qjecon:v:120:y:2005:i:2:p:701-728 is not listed on IDEAS
- Wright, Brian Davern, 1983. "The Economics of Invention Incentives: Patents, Prizes, and Research Contracts," American Economic Review, American Economic Association, vol. 73(4), pages 691-707, September.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:5774. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.