Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/317716 
Year of Publication: 
2023
Citation: 
[Journal:] Small Business Economics [ISSN:] 1573-0913 [Volume:] 62 [Issue:] 3 [Publisher:] Springer US [Place:] New York, NY [Year:] 2023 [Pages:] 939-959
Publisher: 
Springer US, New York, NY
Abstract: 
This study investigates whether public procurement mitigates or exacerbates innovative enterprises’ financial constraints. We distinguish between general and environmentally beneficial innovative enterprises. Theory suggests that the treatment effects of public procurement, particularly when mediated by the demand-pull effect, may lower a company’s funding constraints for innovation. We test this theory with extended probit models allowing for endogenous treatment and selection. The findings reveal a significantly positive treatment effect of public procurement on the probability of facing financial constraints in both areas: general and environmentally beneficial innovative activities. Thus, the principal implications of this study are (1) that being an innovating SME exacerbates financial constraints and (2) that strengthening SMEs’ participation in European public tenders would not contribute to lowering SMEs’ financial constraints. On the contrary, complementary grants or other financial incentives might be necessary to substantially increase the SMEs’ bidding rates in public tenders.
Subjects: 
Public procurement
Financial constraints
General innovation
Green financial constraints
Environmentally beneficial innovation
Small and medium-sized enterprises
Sustainable finance
Green fiscal policy
JEL: 
D22
G28
G30
O16
O31
O44
Q56
H23
H32
H57
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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