Public Procurement of Innovation: Evidence from a German Legislative Reform

Dirk Czarnitzki*, Paul Hünermund, Nima Moshgbar

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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. (C) 2020 Elsevier B.V. All rights reserved.
Original languageEnglish
Article number102620
Number of pages16
JournalInternational Journal of Industrial Organization
Volume71
DOIs
Publication statusPublished - Jul 2020

Keywords

  • Public Procurement of Innovation
  • Public Procurement with Contracted Innovation
  • Innovation
  • Research and Development
  • Econometric Policy Evaluation
  • RESEARCH-AND-DEVELOPMENT
  • EMPIRICAL-EVIDENCE
  • DEVELOPMENT SUBSIDIES
  • MATCHING ESTIMATORS
  • PERFORMANCE
  • DEMAND
  • POLICY
  • HETEROSCEDASTICITY
  • INTERMEDIATION
  • IDENTIFICATION

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