Public Procurement and Innovation

Public Procurement and Innovation

The Role of Institutions

Max Rolfstam

Max Rolfstam examines the increasing emphasis on public procurement as a means to stimulate innovation and the theoretical implications of this policy development. While ‘regular’ public procurement may be regarded as the outcome of anonymous market processes, public procurement of innovation must be understood as a special case of innovation, where social processes, and consequently the institutions governing these social processes, need to be considered. This book contributes to our understanding with a detailed institutional analysis of the public procurement of innovation.

Chapter 3: Legal institutions for public procurement of innovation

Max Rolfstam

Subjects: business and management, public management, innovation and technology, innovation policy, politics and public policy, public administration and management


The interest in public procurement as a means to stimulate innovation provides one explanation of why public procurement law ‘has moved from relative obscurity to become a subject of great legal importance’ (Arrowsmith, 2005, p. iv). There is a clear need to understand how compliance with the EC directives on public procurement affects the possibilities for public agencies to procure innovation. The fundamental question to pursue is the following: do the EC directives hinder public procurement of innovation? This chapter aims at answering this question by discussing the case where Telenor A/S, the former state-owned telecom agency in Norway, acted as a public agency under the directives on public procurement and procured a new system for maritime radio communication. Without giving away the whole story at this stage, the chapter will provide justification for questioning studying the law as a sufficient way of providing the answer to this question. The underlying assertion developed here is that legal studies are central for institutional studies but, if institutions other than formal law are not considered, only subsets of the full answer are achieved. The rationale for carrying out this study was a concern derived from the perceived tension between the interactive characteristics of public procurement of innovation and the implicit assumptions built into the public procurement directives that the possibilities for public agencies to procure innovations may be limited, as maintained by Edquist, Hommen and Tsipouri (2000). These authors claimed that there prevailed a lack of strategic concern in relation to public procurement, as reflected in how the legal framework might affect the possibilities for public procurement of innovations (ibid.).

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