Exploration of the Effectiveness of Public Procurement for Innovation: Panel Analysis of EU Countries’ data

  • Kristina Detelj University of Zagreb Faculty of Organization and Informatics Varazdin Pavlinska 2 HR 42000 Varaždin
  • Timotej Jagric University of Maribor Faculty of Economics and Business Razlagova 14 2000 Maribor
  • Tanja Markovic-Hribernik University of Maribor Faculty of Economics and Business Razlagova 14 2000 Maribor
Keywords: public procurement, innovation policy instruments, panel data analysis, EU

Abstract

This research focuses on the impact of public procurement for innovation (PPI) on a country's level of innovativeness. The available literature primarily consists of case studies that identify PPI’s impact on the innovativeness of particular firms. Therefore, this paper developed an econometric model to investigate the impact of PPI on the innovativeness of EU countries. The model tested the impact of four different innovation policy measures (PPI, R&D subsidies, regulations and cooperation). The results showed that in different model settings, PPI was positively and significantly related to countries’ innovativeness, whereas the other three measures showed low significance. These research findings may be important to policy makers when selecting appropriate measures for promoting innovation and thereby also enhancing their country’s competitiveness.

Author Biographies

Kristina Detelj, University of Zagreb Faculty of Organization and Informatics Varazdin Pavlinska 2 HR 42000 Varaždin
Teaching Assistant
Timotej Jagric, University of Maribor Faculty of Economics and Business Razlagova 14 2000 Maribor
Professor Department of Finance
Tanja Markovic-Hribernik, University of Maribor Faculty of Economics and Business Razlagova 14 2000 Maribor
Department of Finance Head of department

References

Aho, E., Cornu, J., Georghiou, L. & Subira, A. (2006) Creating an Innovative Europe, Report of the Independent Expert Group on R&D and Innovation appointed following the Hampton Court Summit (Luxembourg: Office for Official Publications of the European Union), available: http://ec.europa.eu/invest-in-research/pdf/download_en/aho_report.pdf (September 15, 2011).
Arlbjørn, J. S. & Freytag, P.V. (2012) Public procurement vs private purchasing: Is there any foundation for comparing and learning across the sectors?, International Journal of Public Sector Management, 25(3), pp. 203–220.
Arundel, A. & Kabla, I. (1998) What percentage of innovations are patented? Empirical estimates for European firms, Research policy, 27(2), pp. 127–141.
Aschhoff, B. & Sofka, W. (2009) Innovation on demand—Can public procurement drive market success of innovations?, Research Policy, 38(8), pp. 1235–1247.
Ateljević, J. & Budak, J. (2010) Corruption and public procurement: example from Croatia, Journal of Balkan and Near Eastern Studies, 12(4), pp. 375–397.
Baltagi, B. H. (2005) Econometric Analysis of Panel Data, 3rd ed. (West Sussex, England: John Wiley & Sons Ltd.).
Baum, C. F. (2013) Modified Wald statistic for groupwise heteroskedasticity in fixed effect model, help file in STATA program (Boston: Boston Colege Department of Economics).
Collins, L. (2010) Recession Pushing Innovation in New Directions, Research Technology Management, 53(2), p. 4.
Department of Enterprise, Trade & Employment (2009) Using Public Procurement to Stimulate Innovation and SME Access to Public Contracts, Report of the Procurement Innovation Group, Ireland (Dublin: Department of Enterprise, Trade & Employment).
Detelj, K. (2015) Javna naročila kot orodje za spodbujanje inovacij, PhD thesis (Maribor: University of Maribor, Faculty of Business and Economics).
Diedrichs, E. (2013) Do SMEs Lose Their Appetite for Innovation During the Economic Crisis?, Survey results, available at: http://www.innovationmanagement.se/2013/07/16/do-smes-lose-their-appetite-for-innovation-during-the-economic-crisis/ (September 4, 2013).
Drukker, D. M. (2003) Testing for serial correlation in linear panel-data models, Stata Journal, 3(2), pp. 168–177.
EC (2009) Public Procurement Indicators 2008, performance measurement (Brussels: European Commission), available at: http://ec.europa.eu/internal_market/publicprocurement/docs/indicators2010_en.pdf (May 6, 2012).
EC (2012) Public Procurement Indicators 2011, performance measurement (Brussels: European Commission), available at: http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/public-procurement-indicators-2011_en.pdf (May 6, 2012).
EC (2013) Public Procurement [online] (Brussels: European Commission), available at: http://ec.europa.eu/internal_market/publicprocurement/index_en.htm (March 27, 2013).
EC DGEI (2011) Public Procurement of Innovation: Towards a European Scheme, high level experts workshop (Brussels: European Commission - Directorate General Enterprise and Industry), available at: http://ec.europa.eu/enterprise/policies/innovation/policy/lead-market-initiative/files/conference2011/report_en.pdf (September 12, 2011).
Edler, J. (2009) Demand Policies for Innovation in EU CEE Countries, working paper 579, (Manchester: Manchester Business School).
Edler, J., Edquist, C., Georghiou, L., Hommen, L., Hafner, S., Papadakou, M., Rigby, J., Rolfstam, M., Ruhland, S. & Tsipouri, L. (2005) Innovation and Public Procurement. Review of Issues at Stake (Karisruhe: Fraunhofer Institute for Systems and Innovation Research ISI), available at: http://cordis.europa.eu/innovation-policy/studies/full_study.pdf (August 9, 2011).
Edler, J. & Georghiou, L. (2007) Public procurement and innovation—Resurrecting the demand side, Research Policy, 36(7), pp. 949–963.
Edler, J., Georghiou, L., Blind, K. & Uyarra, E. (2012) Evaluating the demand side: New challenges for evaluation, Research Evaluation, 21(1), pp. 33–47.
Edquist, C., Hommen, L. & Tsipouri, L. (eds.) (2000) Public Technology Procurement and Innovation (New York: Springer Science).
Edquist, C. & Zabala-Iturriagagoitia, J. M. (2012) Public Procurement for Innovation as mission-oriented innovation policy, Research Policy, 41(10), pp. 1757–1769.
EU, OECD (2011) Public Procurement Policy Briefs [online], SIGMA - Support for Improvement in Governance and Management (Paris: OECD), available at: http://www.oecd.org/site/sigma/publicationsdocuments/48630147.pdf (March 27, 20139.
Fagerberg, J. & Srholec, M. (2008) National innovation systems, capabilities and economic development, Research Policy, 37(9), pp. 1417–1435.
FORA, OECD (2009) New Nature of Innovation (Copenhagen: Ministry of Economics and Business Affairs, Division for Research), available at: https://www.tem.fi/files/24835/New_Nature_of_Innovation.pdf. (March 27, 2013).
Foster, J. D. (2013) Budget Cuts Would Not Harm the Economy, Issue Brief, 3851, pp. 1-3.
Frey, C. (2009) Innovation Climate Survey, Survey results (Berlin: Brot für die Welt – Evangelischer Entwicklungsdienst), available at: http://www.weltweitwichteln.de/fileadmin/user_upload/Innovation_Climate_Survey_Results_3-09.pdf (September 4, 2013).
Georghiou, L., Amanatidou, E., Belitz, H., Cruz, L., Edler, J., Edquist, C., Granstrand, O., Guinet, J., Leprince, E. & Orsenigo, L. (2003) Raising EU R&D Intensity: Improving the Effectiveness of Public Support Mechanisms for Private Sector Research and Development: Direct Measures, Independent Expert group report EUR 20716 (Brussels: European Commission), available at: http://ec.europa.eu/invest-in-research/pdf/download_en/report_directmeasures.pdf (March 5, 2013).
Georghiou, L., Edler, J., Uyarra, E. & Yeow, J. (2014) Policy instruments for public procurement of innovation: Choice, design and assessment, Technological Forecasting and Social Change, 86, pp. 1–12, doi: 10.1016/j.techfore.2013.09.018.
Guerzoni, M. & Raiteri, E. (2012) Innovative Public Procurement and R&D Subsidies: Hidden Treatment and New Empirical Evidence on the Technology Policy Mix in a Quasi-Experimental Setting, 18/2012 (Torino: Dipartimento di Economia ‘S. Cognetti de Martiis’), available at: http://brick.carloalberto.org/images/publications/18_wp_2012.pdf (April 15, 2013).
Gujarati, D., N. (2004) Basic Econometrics, 4th ed. (New York: McGraw Hill).
Jovanovic, P., Joksimovic, N. Z. & Milosavljevic, M. (2013) The Efficiency of Public Procurement Centralization: Empirical Evidence from Serbian Local Self-Governments, Lex Localis - Journal of Local Self-governement, 11(4), pp. 883–899.
Kapff, L. (2013) Quantifying Public Procurement of R&D in Europe [online], available at: http://www.frp.nrw.de/frp2/_dld/va/v777/802_PCP%20and%20PPI%20Berlin%20event%2021-22%20March-2013_LK.pdf (June 14, 2013).
Kattel, R. & Lember, V. (2010) Public Procurement as an Industrial Policy Tool an Option for Developing Countries?, Tallinn University of Technology Working Papers (Tallin: Tallinn University of Technology), available at: http://hum.ttu.ee/wp/paper31.pdf (June 14, 2013).
Lember, V., Kattel, R. & Kalvet, T. (2015) Quo vadis public procurement of innovation?, Innovation: The European Journal of Social Science Research, 28(3), pp. 403–421.
Lichtenthaler, U. (2009) Outbound open innovation and its effect on firm performance: examining environmental influences, R&D Management, 39(4), pp. 317–330.
Madrid-Guijarro, A., García-Pérez-de-Lema, D. & Van Auken, H. (2013) An Investigation of Spanish SME Innovation during Different Economic Conditions, Journal of Small Business Management, 51(4), pp. 578–601.
Markard, J., Raven, R. & Truffer, B. (2012) Sustainability transitions: An emerging field of research and its prospects, Research Policy, 41(6), pp. 955–967.
MEE (2010) Demand and User-Driven Innovation Policy, Framework and Action Plan Innovation 48/2010 (Helsinki: The Ministry of the Employment and the Economy).
Merickova, B. M., Nemec, J. & Svidronova, M. (2015) Co-creation in Local Public Services Delivery Innovation: Slovak Experience, Lex Localis - Journal of Local Self-Government, 13(3), pp. 521–535.
MINGORP (2013) Public procurement portal [online] (Zagreb: Ministry of Economy), available at: http://www.javnanabava.hr/ (June 14, 2013).
Montalvo, C. & Koops, O. (2011) Analysis of Market and Regulatory Factors Influencing Innovation: Sectoral Patterns and National Differences, Europe INNOVA Sectoral Innovation Watch (Brussels: European Commission), available at: http://www.europe-innova.eu/c/document_library/get_file?folderId=802930&name=DLFE-13644.pdf (May 14, 2013).
Mowery, D. & Rosenberg, N. (1979) The influence of market demand upon innovation: a critical review of some recent empirical studies, Research Policy, 8(2), pp. 102–153.
Munos, B. (2009) Lessons from 60 years of pharmaceutical innovation, Nature Reviews Drug Discovery, 8(12), pp. 959–968.
Nyiri, L., Osimo, D., Özcivelek, R., Centeno, C. & Cabrera, M. (2007) Public Procurement for the Promotion of R&D and Innovation in ICT (Luxembourg: European Comission and Institute for Prospective Technological Studies), available at: ftp://139.191.159.34/users/publications/public/EURdoc/eur22671en.pdf (May 28, 2013).
OGC, DBIS (2009) Driving innovation through public procurement | Design Coucil, available at: http://www.ogc.gov.uk/documents/OGC09-0679_InnovationBrochure.pdf (September 10, 2011).
Rodriguez, V. & Montalvo, C. (2007) Innovation Policies from the European Union: Methods for Classification, Bulletin of Science, Technology & Society, 27(6), pp. 467–481.
Rothwell, R. & Zegveld, W. (1981) Industrial Innovation and Public Policy: Preparing for the 1980s and the 1990s (London: Frances Printer).
Schroll, A. & Mild, A. (2011) Open innovation modes and the role of internal R&D: An empirical study on open innovation adoption in Europe, European Journal of Innovation Management, 14(4), pp. 475–495.
Slavtchev, V. & Wiederhold, S. (2011) The Impact of Government Procurement Composition on Private R&D Activities, working paper 2011-036, Jena economic research papers (Jena: Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics), available at: http://www.econstor.eu/handle/10419/56846 (April 15, 2013).
Škrabić, B. (2009) Determinants of the financial system development in countries of Central and Eastern Europe, (in Croatian), MSc. thesis, (Split: University of Split, Faculty of Economics).
Uyarra, E. & Flanagan, K. (2010) Understanding the Innovation Impacts of Public Procurement, European Planning Studies, 18(1), pp. 123–143.
World Economic Forum (2013) Global Competitiveness Indicators 2012 - Data Platform [online] (Geneva: World Economic Forum), available at: http://www.weforum.org/issues/competitiveness-0/gci2012-data-platform/ (September 2, 2013).
World Economic Forum (2013) The Global Competitiveness Report 2013-2014 (Geneva: World Economic Forum), available at: http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2013-14.pdf (September 4, 2013).
WGI project (2012) Worldwide Governance Indicators (Washington D.C.: The World Bank), available at: http://info.worldbank.org/governance/wgi/index.asp (September 2, 2013)
Wooldridge, J. (2002) Introductory Econometrics: A Modern Approach, 2nd ed. (South-Western: College Pub.).
Wooldridge, J. M. (2011) Testing heteroskedasticity and autocorrelation fixed effect model (College Station: StataCorp LP) , available at: http://www.stata.com/statalist/archive/2011-03/msg00091.html (October 11, 2013).
Zelenbabic, D. (2015) Fostering innovation through innovation friendly procurement practices: a case study of Danish local government procurement, Innovation: The European Journal of Social Science Research, 28(3), pp. 261–281.
Zeng, S. X., Xie, X. M. & Tam, C. M. (2010) Relationship between cooperation networks and innovation performance of SMEs, Technovation, 30(3), pp. 181–194.

Published
2016-01-02
Section
Articles