Abstract:
Public procurement is widely regarded as an important instrument to foster innovation. We examine how additional award criteria beyond price relate to firms' realized innovation performance by combining representative firm-level data from the German Innovation Survey with official tender-level data from Tenders Electronic Daily and estimating two-way fixed effects models. The results suggest that winning price-based tenders is associated with lower product and service innovation and higher turnover from established products and services, while criteria-based procurement shows an inverse U-shaped relationship between the average length of criteria lists in won tenders and firms' innovation outcomes. Overall, the findings indicate that the innovation effects of public procurement depend not only on whether additional award criteria are used, but also on how extensively they are applied.
