Public procurement can hinder innovation

Bastian Krieger, Malte Prüfer and Linus Strecke

No 739379, Working Papers of Department of Management, Strategy and Innovation, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven

Abstract: Public procurement accounts for 15 to 20 percent of global GDP and is considered an effective innovation policy. However, the detrimental effects of non-innovative public procurement - public procurement tenders awarded solely based on their price - on firm innovations have been largely neglected, even though it represents the majority of all tenders. We contribute by i) developing a comprehensive theory on the effects of winning non-innovative public procurement tenders as a firm and ii) empirically testing our theory by combining representative German data with two-way fixed effect difference-in-differences estimations. In total, the estimations demonstrate winning non-innovative public procurement reduces firms’ product and process innovations on the one hand, and increases firms’ focus on their established products and services on the other hand. These results confirm our theory and empirically hold at the level of the individual firm and the German enterprise sector.

Keywords: Public procurement; Firm innovation; Demand side (search for similar items in EconPapers)
Pages: 36
Date: 2024-03-29
New Economics Papers: this item is included in nep-com and nep-tid
Note: paper number MSI_2403
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Published in FEB Research Report MSI_2403, pages 1-36

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Related works:
Working Paper: Public procurement can hinder innovation (2024)
Working Paper: Public procurement can hinder innovation (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:msiper:739379

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