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Public procurement as policy instrument for innovation

Author

Listed:
  • Dirk Czarnitzki
  • Paul Hünermund
  • Nima Moshgbar

Abstract

The use of 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 tender calls. We analyze a representative sample of German firms to investigate whether this reform stimulated innovation in the business sector. Across a wide set 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 from new products and services. However, our results show that the effect is largely attributable to innovations of more incremental nature rather than market novelties.

Suggested Citation

  • Dirk Czarnitzki & Paul Hünermund & Nima Moshgbar, 2018. "Public procurement as policy instrument for innovation," Working Papers of Department of Economics, Leuven 606259, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:606259
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    Cited by:

    1. 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).
    2. Kok, Holmer & Faems, Dries & de Faria, Pedro, 2022. "Pork Barrel or Barrel of Gold? Examining the performance implications of earmarking in public R&D grants," Research Policy, Elsevier, vol. 51(7).
    3. Christopher F. Baum & Arash Kordestani & Dorothea Schäfer & Andreas Stephan, 2021. "Firms in Green Public Procurement: Financial Strength Indicators’ Impact on Contract Awards and Its Repercussion on Financial Strength," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 90(4), pages 71-92.
    4. Stojčić, Nebojša & Srhoj, Stjepan & Coad, Alex, 2020. "Innovation procurement as capability-building: Evaluating innovation policies in eight Central and Eastern European countries," European Economic Review, Elsevier, vol. 121(C).
    5. Cappelletti, Matilde & Giuffrida, Leonardo M., 2021. "Procuring survival," ZEW Discussion Papers 21-093, ZEW - Leibniz Centre for European Economic Research.
    6. Sergey Tsygankov & Vadim Syropyatov & Vyacheslav Volchik, 2021. "Institutional Governance of Innovations: Novel Insights of Leadership in Russian Public Procurement," Economies, MDPI, vol. 9(4), pages 1-16, December.
    7. Hang, Jing & Zhan, Chaoqun, 2023. "Government procurement and resource misallocation: Evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 568-589.
    8. Cornelia Storz & Tobias ten Brink & Na Zou, 2022. "Innovation in emerging economies: How do university-industry linkages and public procurement matter for small businesses?," Asia Pacific Journal of Management, Springer, vol. 39(4), pages 1439-1480, December.
    9. Edquist, Charles & Zabala-Iturriagagoitia, Jon Mikel, 2020. "Functional procurement for innovation, welfare and the environment," Papers in Innovation Studies 2020/1, Lund University, CIRCLE - Centre for Innovation Research, revised 19 Jul 2020.
    10. 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.
    11. Feld, Lars P. & Schmidt, Christoph M. & Schnabel, Isabel & Truger, Achim & Wieland, Volker, 2019. "Den Strukturwandel meistern. Jahresgutachten 2019/20 [Dealing with Structural Change. Annual Report 2019/20]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201920.
    12. Bernard Hoekman & Marco Sanfilippo, 2020. "Foreign participation in public procurement and firm performance: evidence from sub-Saharan Africa," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(1), pages 41-73, February.
    13. Dorothea Schäfer & Andreas Stephan & Sören Fuhrmeister, 2022. "The Impact of Public Procurement on Financial Barriers to Green Innovation: Evidence from European Community Innovation Survey," Discussion Papers of DIW Berlin 2014, DIW Berlin, German Institute for Economic Research.
    14. Fadic, Milenko, 2018. "Government Procurement and the Growth of Small Firms," MPRA Paper 87015, University Library of Munich, Germany.

    More about this item

    Keywords

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    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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