Public procurement of innovation and regional development in peripheral areas

Abstract

Public procurement of innovation (PPI) is a demand-side innovation policy tool. The use of PPI to foster innovation and regional development is not a trivial task, due to the combination of different goals that may be contradictory. The role of PPI to promote regional development may be more relevant in peripheral regions, due to the institutional thinness and the lack of technological capabilities. The main aim of this paper is to assess the potential role of PPI to contribute to regional development. It analyses the empirical evidence of the use of PPI in the Spanish regions, focusing on the main characteristics of the enterprises. Special attention is given to the healthcare sector, due to its relevance in public procurement. In this sense, the pioneer experience of Galicia (Spain) is illustrative of its use in a peripheral region. The results suggest that the effects on regional development depend on several features, such as the productive structure and the innovation capabilities of the region. The coordination of supply and demand-side policies seems crucial to obtain better results regarding innovation performance and regional development.

Keywords:

• public procurement of innovation
• regional development
• innovation policy
• demand policy
• supply-base capabilities
• peripheral areas
• healthcare

Acknowledgements

The authors would like to thank the valuable cooperation of the people and institutions that have collaborated in the field research.

Notes

1 The term lead user can be interpreted in two ways. The simplest way is that it is the main user, regardless of whether it is the first or not. The second way, based on von Hippel (1986), considers that the lead user faces needs in advance of the market. Due to their knowledge and experience, lead users participate in the innovation process at least formulating needs and demands. However, it should be taken into consideration that first users test the new technology to meet the needs, due to the fact that technology may still be at an early stage of development.

2 It should be mentioned the increasing activity of recycling enterprises that were not directly contracted by the public sector, but by supplier enterprises to the public sector. The public sector suppliers designed and provided new lighting systems removing the old ones, when the recycling enterprises begin their activity. In the case of the Canary Islands the procurement of Energy Service Companies services for official buildings at the regional level created an imitation effect among local governments (Peñate-Valentín, Pereira, and Sánchez-Carreira 2018). Moreover, the multinational enterprise Iberdrola is being pioneer in the implementation of private procurement of innovation in Spain.

3 The Lead Market Initiative set by the European Union in 2007 for the period 2008–2011 attempts to develop six key markets leaded by EU enterprises with the support of demand-side policies, including public procurement. The six selected leading markets were bio-based products, e-health, protective textiles, sustainable construction, recycling, and renewable energies. The results of this pioneer initiative are low than expected, although there are notable differences depending on the sector and the considered dimension. For a more detailed analysis of each market, see the mentioned studies.

4 The term peripheral is not only referred to the geographical position, because it also involves historical events or exogenous shocks (Tödtling and Trippl 2005; Markusen 1996). Peripheral regions are characterised by institutional thinness, lack of technological capabilities and critical mass (Markusen 1996; Martin and Sunley 2006; Gorenstein and Moltoni 2011; Tödtling and Trippl 2005).

5 It is mandatory to publish tenders above the threshold values set by the European Directives on Public Procurement in the EU Tenders Electronic Daily.

6 It should be mentioned that the terms cases and projects are different. The term case is more global, and it can include several projects. A case raises a problem to which the public sector wants to provide a solution. The project (or subproject) is each of the different tenders or specific solutions pursued by the public sector to solve the identified problem. Therefore, the projects are not the same that the lots into which a large tender can split.

7 It should be taken into account the difficulty of identifying innovation in regular public procurement, because the innovative outcome is not explicitly expected. Moreover, the projects under development have not already achieved the final outcome.

8 Following that definition, there are four types of enterprises: microenterprises, small, medium and large enterprises. The size is defined according to the employment, the annual turnover and balance sheet. SMEs are enterprises with less than 250 employees, a total annual turnover not exceeding 50 million euros, or a balance sheet not exceeding 43 million euros.

Additional information

Funding

This work was supported by the Eramus+ Programme of the European Union Project EURIPER, under [grant number 587410-EPP-1-2017-1-ES-EPPJMO-PROJECT].

Notes on contributors

María del Carmen Sánchez-Carreira

María del Carmen Sánchez-Carreira is Assistant Professor at the Department of Applied Economics, University of Santiago de Compostela and member of ICEDE Research Group. Her main research topics are state-owned enterprises, privatization, innovation policies and public procurement. Apart from academic publications, she has participated in several international and national projects.

María Concepción Peñate-Valentín

María Concepción Peñate-Valentín is an Economist and Researcher in Economics at the University of Santiago de Compostela. Her main research fields are innovation policies, sustainability and development. In particular, she focuses on tools from the demand-side, such as public procurement of innovation.

Pedro Varela-Vázquez

Pedro Varela-Vázquez is a researcher and lecturer at the University of Santiago de Compostela and member of ICEDE Group. His research focuses on wind sectoral policies, socio-economic impact of renewable energies and their market diffusion.