Buying innovation vs buying protection: What we know about public procurement of innovation

摘要

Europe is turning public procurement into an instrument of industrial policy. The Industrial Accelerator Act and the proposed Public Procurement Act would let public buyers favour European suppliers in strategic sectors, and Beijing has already threatened retaliation. This column reviews what economic research so far tells us about public procurement as an innovation policy. Public procurement appears to spur innovation, most often incremental innovation, particularly among young and small firms, but only when tenders leave room for new solutions and buyers have the skills to manage them. Closing markets to foreign firms is a different policy though, and its potential benefits appear highly dependent on careful targeting and design.