Public Procurement for Innovation

Public Procurement for Innovation

Eu-SPRI Forum on Science, Technology and Innovation Policy series

Edited by Charles Edquist, Nicholas S Vonortas, Jon M Zabala-Iturriagagoitia and Jakob Edler

This book focuses on Public Procurement for Innovation. Public Procurement for Innovation is a specific demand-side innovation policy instrument. It occurs when a public organization places an order for a new or improved product to fulfill certain needs that cannot be met at the moment of the order. The book provides evidence of the potential benefits to public and private actors from the selective use of this policy instrument and illustrates the requirements and constraints for its operationalization. The book intends to significantly improve the understanding of key determinants of effective public procurement aiming to promote innovative capabilities in the supplying sectors and beyond. It provides both case studies and conceptual contributions that help extend the frontier of our understanding in areas where there are still significant gaps.

Chapter 3: Building capability for public procurement of innovation

Ville Valovirta

Subjects: economics and finance, economics of innovation, innovation and technology, economics of innovation, innovation policy, politics and public policy, public administration and management

Extract

As governments are adopting public procurement for innovation as a focal instrument in their toolboxes for demand-driven innovation policies, public sector organizations are faced with a need to develop capability to manage new organizational processes. Public procurement for innovation (PPI) is a policy instrument which requires adopting novel skills and management practices. Innovation policy-related efforts to use public procurement to promote supplier innovation will encounter intersecting goals at the level of public agencies, and are not likely to be translated into effective implementation without building required capabilities. Indeed, recent research has indicated that insufficient management skills have accounted for failures in PPI projects (for example, Rolfstam, 2007). Many of these capabilities are not part of regular procurement competencies. General management also needs to adjust practices to reap the full benefits of the novel approach, and new organizational practices extending beyond the procurement function may need to be established. Market-based governance models and increased use of outsourcing and contracting out service production have transformed many public agencies from service production organizations to procurement organizations. Purchasing and contracting have become core functions in many public agencies. This development, together with the increasing complexity of various technical systems, has led public agencies to purchase larger and more complex objects. The emphasis has shifted from procurement of goods to service contracting and purchase of complex service–product combinations (Schapper et al., 2006; Caldwell and Howard, 2011). As digitalization of government activities advances, various types of integration issues also emerge.

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