Growing academic interest in public procurement of innovation
PPI gained a renewed interest from scholars before related policy measures became increasingly pervasive in innovation policy agendas. Few research were undertaken on the topic in the 1980s and 1990s (Dalpé, 1994; Dalpé et al., 1992; Geroski, 1990; Rothwell, 1984). However, the bulk of research on PPI follows the publication of ‘Public Technology Procurement and Innovation’ by Edquist, Hommen and Tsipouri in 2000, and the 2007 seminal paper by Edler and Georghiou entitled ‘Public Procurement and Innovation – Resurrecting the Demand Side’.
An important stream of the literature on PPI investigates drivers of and obstacles to innovation in the public procurement process in order to explain the observed discrepancy between policy discourse and the actual implementation of PPI on the ground (Rolfstam, 2015). For that purpose, a number of case studies explore the rolling out of PPI initiatives at the local level (e.g. Dale-Clough, 2015; Knutsson and Thomasson, 2014; Lember et al., 2007, 2011; Uyarra, 2010). Other research focus on specific factors influencing the implementation of PPI initiatives, like the role of institutions (Rolfstam, 2009), the capabilities of public organisations (Valovirta, 2015), risk management (European Commission, 2010a), and the centralisation of public procurement (Albano and Sparro, 2010; Uyarra, 2010). Uyarra et al. (2014) analyse the obstacles to innovation in the public procurement procedure that are perceived by suppliers, and compare them against related policy measures in the United Kingdom. Some scholars focus on specific policy instruments for PPI, such as Forward Commitment Procurement (Whyles et al., 2015), the official accreditation of certain innovative products (Li and Georghiou, 2016), or foresight exercises (Vecchiato and Roveda, 2013).
The findings of these studies can contribute to the design of policy interventions likely to foster the strategic use of public procurement for innovation. Policy-making should indeed rely on strategic intelligence defined as “a set of sources of information and explorative as well as analytical (theoretical, heuristic, methodological) tools and indicators employed to produce useful insight in the actual or potential costs and effects of public or private policy and management” (Kuhlmann, 2002, p. 34). An information of utmost importance for the design of policy interventions is the objective that they aim to achieve. In other words, the selection and implementation of appropriate instruments must depend on the nature of the problems to solve.
Policy instruments is an intangible concept ‘carrying out quite different meanings from time to time, place to place and actor to actor’ (Flanagan et al., 2011, p. 706). We understand them here as consisting of public action techniques (mobilising public resources) geared towards the achievement of policy goals (Howlett, 1991; Kergroach, 2017; Martin, 2016).
Building a unified typology of PPI: innovation failures to remedy and contribution to grand challenges
In parallel of scholarly discussion on the definition and delineation of PPI, several typologies have been elaborated, based on different variables, reflecting the variety of categories of PPI that can be considered.
Edler et al. (2005) distinguish PPI according to the locus of social needs to be satisfied (either intrinsic to public organisations, shared with private end-users, or extrinsic to public organisations), and to its effects on market (development, adaptation and standardization). Hommen and Rolfstam (2009) suggest a third dimension, which they call ‘design of innovation public technology procurement’ but that refers to the relation between public and private demands, the reasons for public intervention, the kinds of innovation involved, and the modalities of public intervention. Finally, Rolfstam (2013) proposes extending the original typology by considering the cases of market destruction (market effect) and ‘distributed’ public procurement5 (targeted needs).
In contrast to this approach, Uyarra and Flanagan (2010) highlight the wide variety of products and services that public organisations can procure. They elaborate a typology of PPI according to the level of specialisation of these products and services (whether their inputs come from specialists or not) and to the degree of uniformity of their users’ needs (whether they target a niche or not). Edler and Georghiou (2007) do not built any formal typology, but identify two additional forms of PPI: general PPI where innovation is an additional criterion in calls for tenders, and strategic PPI targeting specific products or services.
There is little evidence of the actual impact of these different PPI categories on innovation, because of difficulties in delineating PPI from regular public procurement and in measuring its volume (Uyarra, 2016). Furthermore, PPI challenges the definition of innovation given in the Oslo Manual (OECD and Eurostat, 2005) which is widely used to collect related data (Appelt and Gualindo-Rueda, 2016). Aschhoff and Sofka (2009) and Guerzoni and Raiteri (2015) are the very few scholars who have conducted quantitative analyses of the (relative) impact of public procurement on innovation. They confirm the statement of Geroski (1990), according to whom public procurement “is a far more efficient instrument to use in stimulating innovation than any of a wide range of frequently used R&D subsidies” (Geroski, 1990, p. 183).
Despite (severe) limitation in quantitative evidence, scholars have insisted on the potential positive influence of PPI on innovation (Uyarra and Flanagan, 2010). PPI can accelerate the modernisation of public services, making them more cost-efficient and improving their quality (OECD, 2014b). Dalpé (1994) focuses on its positive effect on industry, especially when the public sector acts as a first user (Dalpé et al., 1992). PPI can have a role in the development of knowledge-intensive regional systems (Rothwell, 1984) and the transformation of existing systems (Gee and Uyarra, 2013). It can indeed foster change in users’ habits and accelerate the uptake of new products and services (Morgan and Sonnino, 2007; Phillips et al., 2007), but also support the transition of firms in a selected direction, like the provision of fresh, local and organic meals for public schools (Sonnino, 2009). For that reason, Edquist and Zabala-Iturriagagoitia (2012) 5 In distributed public procurement, a “public agency publishes some kind of opportunity without either specifying a problem or making a commitment to procure anything” (Rolfstam, 2013, p. 26) content that ‘public procurement for innovation’ can help the mitigation of grand challenges and therefore be the means of mission-oriented policies. However, PPI geared toward mitigating grand challenges differ from PPI underpinning traditional mission-oriented policies that target specific objectives like Project Apollo (Soete and Arundel, 1993). The increasing pervasiveness of grand challenges, consisting of wicked societal problems requiring complex solutions, call for re-thinking the rationales for demand-side innovation policies, including PPI, and their implementation modalities (Boon and Edler, 2017).
Explaining the role of PPI in market formation
PPI can have a positive effect on innovation by stimulating the creation of markets (Box, 2009; Edler and Georghiou, 2007; Edler and Uyarra, 2013; Rothwell, 1984). Public procurement in general can influence markets in three ways. It may increase demand, set new standards, and modify the structure of markets (Cabral et al., 2006). Through PPI, public organisations can additionally act as lead users, i.e. users less risk-averse, more inclined to absorb innovations, and “whose present strong needs will become general in a market-place months or years in the future” (von Hippel, 1986, p. 791). Lead users provide innovation producers with feedbacks and thereby contribute to make environments more favourable to innovation. Furthermore, they are willing to pay a premium for innovative products and services. Due to these characteristics, lead users can accelerate the emergence of lead markets, which consist of “regional markets with specific attributes that increase the probability that a locally preferred innovation design becomes internationally successful as well” (Beise and Cleff, 2004, p. 455). In sum, public sector can act as a lead user, through PPI, and stimulate the creation of lead markets. Finally, Neij (2001) demonstrates that PPI helps the transformation of markets by accelerating the commercialisation and market penetration of technologies that had been underutilised so far.
Market creation and development is one of the core functions that innovation systems must ensure to lead effectively to innovation (Bergek et al., 2008). It involves the generation and coordination of knowledge and information (Potts, 2001). Any malfunction in this respect justifies policy intervention (Bleda and del Río, 2013).
Justifying the use of public procurement for innovation: Failures
The literature identifies different sets of failures as rationales for innovation policy. Despite their hardly compatible underlying assumptions, policy-makers seemingly ‘cherry-pick’ them to justify their policy interventions (Laranja et al., 2008). Bach et al. (2014) similarly notice that the recipients of policy support barely distinguish underlying rationales. In this context, our contribution to policy-making would be low, if we focused exclusively on one set of failures and disregard the others. We contend nevertheless that evolutionary economics and the derived systemic perspective of innovation enable a better understanding of PPI. They indeed focus on knowledge coordination and interactive learning, which are key to PPI. However, as market failures derived from neo-classical economics are still very pervasive in policy discourse, we cannot reasonably disregard them in our research. Therefore, following the approach advocated by Bach and Matt (2005), we focus on the complementarities of these theoretical frameworks, instead of their antagonism.
We choose a macro-meso-micro approach defining three different levels of policy rationales. At macro level, policy-makers decide on the overall direction of their policy interventions for achieving identified broad objectives (Mazzucato, 2016; Mazzucato and Perez, 2015). They must then select a set of vertical policies and ensure their coordination in a policy mix (Flanagan et al., 2011). These vertical policies are our meso level. Although we acknowledge that policy interactions within policy mixes are of key importance, we focus, in this dissertation, on their individual rationales. We identify the so-called ‘failures’ that they aim to overcome in markets or systems to make innovation happen. Finally, at micro level, policy makers design their policy interventions so that they encourage practices unleashing collaboration between public procurers and suppliers for the development of new products.
Table of contents :
1. CONTEXT AND AMBITION OF THE DISSERTATION
1.1. Growing initiatives for encouraging the strategic use of public procurement for innovation
1.2. Growing academic interest in public procurement of innovation
2. POSITIONING OUR RESEARCH QUESTIONS
2.1. Definition of Public Procurement of Innovation
2.2. Building a unified typology of PPI: innovation failures to remedy and contribution to grand challenges
2.3. Explaining the role of PPI in market formation
2.4. Exploring public procurer-supplier collaboration
3. OUR THEORETICAL BACKGROUND: FAILURES – DESIGN – PRACTICE
3.1. Justifying the use of public procurement for innovation: Failures
3.2. Choice of policy instruments and modalities of implementation: Design
3.3. Rolling out instruments for public procurer-supplier collaboration and PPI: Practices
4. METHODOLOGY FOR ANSWERING OUR RESEARCH QUESTIONS
5. A THREE-ESSAY DISSERTATION
5.1. Overall outline of the dissertation
5.2. Chapter 1 – Public procurement of innovation: A review of rationales, designs and contributions to grand challenges
5.3. Chapter 2 – The role of public procurement in the formation of markets for innovation: an evolutionary perspective
5.4. Chapter 3 – Collaborative development of innovations though early supplier involvement in public procurement procedures
CHAPTER 1. PUBLIC PROCUREMENT OF INNOVATION: A REVIEW OF RATIONALES, DESIGNS AND CONTRIBUTIONS TO GRAND CHALLENGES
2. CHALLENGE-DRIVEN INNOVATION POLICIES
3. TYPOLOGY BUILDING METHODOLOGY: A TWO STAGE LITERATURE REVIEW
4. POLICY RATIONALES FOR PPI FROM A CHALLENGE-ORIENTED PERSPECTIVE: TOWARDS AN ANALYTICAL FRAMEWORK .
4.1. Demand-side failures
4.2. Supply-side failures
4.3. User-producer interaction failures
4.4. A failure-based analytical framework
5. PPI RATIONALE AND DESIGN
5.1. Consequences of demand-side failures
5.2. Consequences of supply-side failures
5.3. Consequences of user-producer interactions failures
CHAPTER 2. THE ROLE OF PUBLIC PROCUREMENT IN THE FORMATION OF MARKETS FOR INNOVATION: AN EVOLUTIONARY PERSPECTIVE
2. EVOLUTIONARY FORMATION OF MARKETS FOR INNOVATION
3. RESEARCH METHODOLOGY: ANALYSIS OF SECONDARY CASE STUDIES
4. INFLUENCE OF PPI IN THE EVOLUTIONARY DYNAMICS OF MARKET FORMATION
4.1. Origination (stage 1 of market formation)
4.2. Adoption (stage 2 in market formation)
4.3. Retention (stage 3 in market formation)
5. DISCUSSION AND CONCLUSION
CHAPTER 3. COLLABORATIVE DEVELOPMENT OF INNOVATIONS THOUGH EARLY SUPPLIER INVOLVEMENT IN PUBLIC PROCUREMENT PROCEDURES
2. DEFINING PROCURER-SUPPLIER COLLABORATION FAILURES: THEORETICAL BACKGROUND
2.1. Main obstacles to innovation in public procurement
2.2. Procedures of public procurement of innovation
2.3. Procurer-supplier collaboration failures: theoretical insights from early supplier involvement approaches
3. METHODOLOGY: QUALITATIVE INTERVIEWS
4. PROCURER-SUPPLIER COLLABORATION FAILURES
4.1. Categories of collaboration failures
4.2. Comparison of collaboration failures affecting the standard PPI procedure and competitive dialogue
4.3. Diverging perceptions of collaboration failures between procurers and suppliers
4.4. Additional procedures and strategies for the collaborative development of innovations via public procurement
5.1. Interpretation of the PPI rules by public procurers and suppliers as a source of failures
5.2. Shedding light on the willingness to collaborate and varying forms of trust building in public procurement