Public Procurement of Innovation

Abstract: Policy-makers in the European Union (EU) have increasingly emphasised public procurement as an instrument that can be used to stimulate innovation. These developments reflect and respond to a growing concern among EU member states and regions about how to maintain competitive advantage in an economic environment increasingly subject to global competition The Lisbon goals set for the EU in 2000 require it to become the most competitive and dynamic knowledge-based economy in the world by 2010. In order to realize this ambition, the European Commission (EC) has urged EU member states to consider “encouraging public procurement of innovative products and services”. The EC has also recommended that, in order to create an innovative Europe, public procurement should be used to “drive demand for innovative goods, while at the same time improving the level of public services”. In line with this policy orientation, a recent high level policy report has put forward explicit arguments in favour of “using public procurement to encourage innovation by providing a ‘lead market’ for new technologies”. Generally, the research literature concurs with policy-makers’ claims that public procurement can be a useful instrument for stimulating innovation. The public sector can “play an important role as a stabilising and stimulating pacer in a situation where the private sector is confronted with extremely unstable environments”. In order to stimulate private sector innovation by creating demand, a public agency can perform direct procurement (buying something to fulfil intrinsic need), acting as a proxy customer (e.g. by creating standards) or as a linkage creator between suppliers and users. The purpose of this thesis is to develop an innovation theory-based approach to innovation policy regarding public procurement of innovations, by elaborating an institutional focus via research on innovation policy formulation as institutional design complemented by research on institutional determinants of innovation performance. Thus, the purpose is to explore and describe institutional aspects of policies for public procurement of innovations, with an emphasis on institutions as both outcomes of policy making and input factors affecting the success or failure of policy implementation. By relating an institutional perspective on public procurement of innovations to both the design of policy and its impact on innovation performance, it would become possible to describe and analyse processes involving public procurement of innovations in a better way, and thereby to derive implications for both researchers and practitioners. The empirical studies appended to this thesis demonstrate that institutions matter, i.e. that the behaviour and outcome of public procurement of innovations are affected by institutions.