Does public procurement select (real) outsider innovation? The interplay between tender design and supplier experience

Bastian Krieger, Leon Steines, Hendrik Hermann Bangert, Andreas Glas and Michael Eßig

No 26-029, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Public organizations rely on open innovation to maintain and improve public service performance. Suppliers are a key source of such innovation. Public contracting authorities act as the interface between public organizations and supply markets, shaping whether supplier innovations are identified, rewarded, and selected. Combining representative firm-level data from the German Community Innovation Survey with official tender-level data from the Tenders Electronic Daily database, we construct firms' public procurement award histories between 2006 and 2023. We distinguish between four tender categories that differ by geographic scope (domestic versus international) and award mechanism (price-based versus criteria-based). We further differentiate between "real outsiders" and "pseudo-outsiders" based on experience supplying public markets. Using multivariate probit models, we examine how different degrees of innovation novelty are associated with supplier selection across tender categories and outsider status. Three findings emerge. i) Suppliers' category-specific procurement experience increases the likelihood of subsequent selection, indicating rigidity in public procurement markets. ii) Price-based tenders are associated with firm-level novelties, whereas criteria-based tenders are associated with market-specific novelties. iii) These innovation advantages are concentrated among "real outsiders" and largely disappear for "pseudo-outsiders", for whom prior category-specific procurement experience becomes the main predictor of subsequent selection.

Keywords: Public procurement; open innovation; supply markets; tender design; competition (search for similar items in EconPapers)
JEL-codes: D40 H57 O36 (search for similar items in EconPapers)
Date: 2026
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