Abstract:
We study how demand related to the digital transformation of public institutions affects local suppliers of IT-related services and products in the Czech Republic during 2012-2022, a period of rapid digital transformation of the public sector. Using firm- and tender-level data and difference-in-differences identification strategy, we compare the performance of winners of IT-related public tenders to that of other similar bidders after their first participation in a public tender. We find that winning a public tender has significant and long-lasting effects on firm employment, fixed assets, and revenues. We also find evidence for two underlying mechanisms: reducing financial constraints, which helps winners accumulate fixed assets, and learning by doing, which helps winners secure future public tenders and to diversify geographically and institutionally. The benefits are the largest for young firms and for firms that initially win large tenders.
