Innovation and Public Procurement. Review of Issues at Stake

The use of public demand to spur innovation has recently seen a very significant in-crease in political support. Such a policy promises improvement of public services on all state levels, combined with a contribution to innovation dynamics. It has become clear that strong efforts are needed to mobilise procurement at all state levels for inno-vative markets. These efforts need to be based on a better understanding of how public procurement actually can and should work – in a very practical sense – to contribute to more innovative activity in industry and to the growth or even creation of markets for innovative products and services. This is shown by the literature review.In innovation theory, user-producer interaction and interactive learning are centrally important aspects of the innovation process. In innovative public procurement, knowl-edge about procurers’ needs must be transferred to potential suppliers, and suppliers’ knowledge of possible technological solutions must be transferred back to procurers. Regular public procurement of standardised products such as office materials does not typically require this kind of interaction, as the characteristics of these products are well known and the corresponding needs are self-evident. From this perspective, public procurement of innovations has heavier requirements for interaction between procurers and potential suppliers than does ‘regular’ public procurement of standard products.Procurement of innovation can take place at different stages of market development and corresponding phases of the technology life cycle. Public procurement viewed in this dimension can occur in three different stages, initiation, escalation and consolida-tion. In the initiation stage there has typically not yet emerged a market for the procured technology, and public technology procurement may thus also involve the creation of a new market. Public procurement in the escalation stage takes place where there exists a market for the procured technology, but the market requires further development in order for the technology to be successfully diffused and the market expanded. Public procurement in the consolidation stage occurs in the later stages of the technology life-cycle and may involve the ‘bundling’ together of niche markets for a relatively mature technology.The study analyses existing rules and current practices of public innovation procure-ment in a large set of countries and provides examples of good practices for concrete procurement activities. This executive summary presents general lessons from nine case studies of innovative procurements, and the key characteristics of the country analysis. (Less)