Innovation on Demand - Can Public Procurement Drive Market Success of Innovations

32 Pages Posted: 13 Aug 2008

See all articles by Birgit Aschhoff

Birgit Aschhoff

ZEW – Leibniz Centre for European Economic Research

Wolfgang Sofka

Tilburg University; CentER; CIR

Date Written: 2008


Public procurement has been at the centre of recent discussions on innovation policy on both European and national levels (e.g., Aho-Report, Barcelona Strategy). It has a large potential to stimulate innovation since it accounts for 16% of combined EU-15 GDP. We embed public procurement for innovation into the broader framework of public policies to stimulate innovation: regulations, R&D subsidies and knowledge infrastructure (i.e. basic research at universities). We synthesize the characteristics of all four instruments based on existing literature and quantitatively compare their effects on innovation success. Our empirical investigation rests upon a survey of more than 1,100 innovative firms in Germany. Our survey puts us in the position to trace all sources of valuable innovation impulses, namely public customers, law and regulations, universities and public funding for R&D. We relate these sources back to innovation success. We find that (non-defense related) public procurement and knowledge spillovers from universities propel innovation success equally. In a second step, we explore whether these effects vary across firms (e.g. size, location, industry). The benefits of university knowledge apply uniformly to all firms. However, public procurement is especially effective for smaller firms in regions under economic stress as well as in distributive and technological services. Based on these findings targeted policy recommendations can be developed.

Keywords: Innovation policy, public procurement, comparison of instruments, innovation success

JEL Classification: O38, H32, C34

Suggested Citation

Aschhoff, Birgit and Sofka, Wolfgang, Innovation on Demand - Can Public Procurement Drive Market Success of Innovations (2008). ZEW - Centre for European Economic Research Discussion Paper No. 08-052, Available at SSRN: or

Birgit Aschhoff (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
+49 621 1235 182 (Phone)
+49 621 1235 170 (Fax)

Wolfgang Sofka

Tilburg University ( email )


CentER ( email )

P.O. Box 90153
Tilburg, 5000 LE

CIR ( email )

Warandelaan 2
Tilburg, 5000 LE

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