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Public procurement as policy instrument for innovation

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  • 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. 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," Discussion Papers of DIW Berlin 1984, DIW Berlin, German Institute for Economic Research.
    2. 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.
    3. 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).
    4. 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.
    5. Fadic, Milenko, 2018. "Government Procurement and the Growth of Small Firms," MPRA Paper 87015, University Library of Munich, Germany.

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    More about this item

    Keywords

    Public Procurement of Innovation; ublic Procurement with Contracted Innovation; Technical Change; 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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