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Fostering regional innovation, entrepreneurship and growth through public procurement

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Abstract

RIS3 is a policy initiative aiming to achieve structural change. Structural change needs to consider the processes and means through which (innovation) policies can facilitate a radical transformation by substantially changing a regional economy’s competitive bases. In this paper, we are interested in studying how certain policy instruments are actually implemented, and how the capabilities required for their effective rollout are built in practice. In particular, we focus on public procurement as a policy instrument that can foster regional innovation, entrepreneurship, and growth, while also transforming the industrial structure of a territory. The rationale for focusing on public procurement is threefold: (i) despite being identified as one of the relevant policy instruments to implement RIS3, little is yet known about how public procurement can be used for higher-order political purposes such as innovation-based diversification and transformation; (ii) public procurement remains an underexplored policy tool in sub-national innovation strategies; and (iii) public procurement links to the two key concerns of RIS3, namely, policy prioritization and the entrepreneurial discovery process. The paper provides evidence on two public procurement initiatives in Galicia (Spain), one in health and the other in unmanned aerial vehicles. We adopt a mixed-method approach, relying on a qualitative exploration of the factors leading to the institutionalization of public procurement in policy-making. Our results evidence that innovation-oriented public procurement has the potential to develop local priorities and strategies while also creating the necessary capabilities on both supply and demand. As a result, it can lead to the territorial transformation and to the emergence and further development of entrepreneurial firms.

Plain English Summary

Public procurement can foster innovation, entrepreneurship, and growth while transforming the industrial structure, but… how to roll it out for its effectively? The paper provides the following implications for the practice of innovation policy. For an effective implementation, governments need to adopt a mission orientation that addresses grand challenges and provides directionality to the policy. It is also necessary to mobilize financial resources from supranational, national, and regional funds, what requires coordination and multi-level governance. When governments lack previous experience in innovation policy, they can conduct trial-and-error experiments that facilitate policy learning and lead to the development of capabilities, both on the demand and supply side. This experimentation should follow open innovation approaches by incorporating end-users, to open up policy definition to societal actors. At the same time, this facilitates the development of early market conversations that help to better frame the policy, institutionalize the policy definition process, and gain internal legitimacy. Policies also should seek for creating positive spillovers and knowledge transfer between large and small firms.

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Notes

  1. In the context of this paper, and following Schot and Steinmueller (2018, p. 1562), territorial transformation is understood as a process that requires “radical change in all elements of the configuration.”

  2. RIS3 may be considered a challenge and/or mission-oriented innovation policy (Chiang 1991), since the starting point is given by the selection of the societal (i.e., grand) challenges to be tackled (Mazzucato 2018). Note that mission-oriented policies and those oriented towards grand challenges are not necessarily the same (e.g., defense policies are mission-oriented but not oriented to grand challenges).

  3. For some exceptions, see Kalvet and Lember (2010), Lember et al. (2011), Lehtinen (2012), or Nijaki and Worrel (2012).

  4. Morgan (2017) considers that PPI is the “sleeping giant” of regional innovation policy.

  5. Public procurement directives in Europe have introduced a set of procedures to allow for these interactions to take place: open, restricted and negotiated procedures, competitive dialogues, design contests, and innovation partnerships. See Directive 2014/25/EU on the coordination of the procurement procedures of entities operating in the water, energy, transport, and postal services, and Directive 2014/24/EU on the coordination of procedures for the award of public works contracts.

  6. In line with Mahroum and Al-Saleh (2013, p. 323), “anchoring supply” processes are here defined as the ability to identify and apply external sources of innovation in the local economy.

  7. See Xunta de Galicia (2014) for a detailed discussion of the diagnosis made during the formulation of the RIS3 for Galicia 2014-2020, in which 10 priorities, grouped into 3 challenges, were identified.

  8. In 2013 the region was recognized by the European Commission as a reference in active ageing. That same year, the SERGAS was given the national award in innovation and design-based PPI (see: https://www.sergas.es/docs/premioID2013/index.html). Finally, in 2015, the region received the second European procurement of innovation award (see: http://eafip.eu/wp-content/uploads/2015/06/eafip_Paris_programme.pdf).

  9. See: https://www.isciii.es/QueHacemos/Innovacion/Documents/Guia_de_buenas_practicas_en_compra_publica_innovadora_ITEMAS.pdf (in Spanish).

  10. These secondary data include the guide of good practices to stimulate PPI in Galicia (Guía de buenas prácticas para favorecer la Contratación Pública de Innovación en Galicia), the initiatives and calls launched by the Galician Innovation Agency (GAIN) on public procurement (see https://gain.xunta.gal), the information collected by the Health Knowledge Agency (see https://acis.sergas.gal), the definition of the needs targeted by the procuring entities, the early market demands identified in health and in the Unmanned Aerial Vehicles (see sections 5.1 and 5.2 respectively), the questions posed by potential suppliers and the answers provided by the relevant purchasing bodies in the early market dialogues and consultations, and the documents describing the procurement contracts for innovative technologies in the Innovasaúde, Hospital 2050, and the Civil UAV initiatives, among others.

  11. Online appendix 1 introduces the questions that guided the interviews conducted during the research process.

  12. Online appendix 2 summarizes the profiles of the interviewed stakeholders.

  13. See this early market demand (in Spanish) at: https://www.sergas.es/Docs/H2050_IS/Mapa%20demanda%20temprana.pdf

  14. In this paper, sophistication is understood as the search and development of innovative solutions that are not available on any market.

  15. To date, Código100 has received 215 proposals, of which 65% are related to the application of ICT in health. Of them, 48.5% come from large firms (>250 employees), 7.4 from middle-sized companies (between 40 and 25 employees), 17.3% from small firms (between 10 and 40 employees), and 26.7% from micro-firms (<10 employees). Of these proposals, 47% come from the Galician region.

  16. See https://www.uavgalicia.com/ and http://www.civiluavsinitiative.com/

  17. See this early market demand (in Spanish) at: http://documentos.galiciainnovacion.es/CUI/Mapa_Demanda_Tempera_GL_ES_EN.pdf

  18. The details of these 5 projects can be found here (in Spanish): http://gain.xunta.gal/artigos/308/publicacion+5+primeras+licitaciones+programa+soluciones

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Acknowledgements

The author is grateful to the editors and the anonymous reviewers, as well as to Elvira Uyarra, Kieron Flanagan, and Edurne Magro for their comments on an earlier version of this manuscript.

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Financial support from the Basque Government Department of Education, Language Policy, and Culture (IT 885-16) is received.

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  1. Deusto Business School, University of Deusto, Donostia-San Sebastian, Spain

    Jon Mikel Zabala-Iturriagagoitia

  2. South Eastern University Norway, Hasbergs vei 36, 3616, Kongsberg, Norway

    Jon Mikel Zabala-Iturriagagoitia

  3. CIRCLE, Solvegatan 16, P.O. Box 117, 22100, Lund, Sweden

    Jon Mikel Zabala-Iturriagagoitia

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Zabala-Iturriagagoitia, J.M. Fostering regional innovation, entrepreneurship and growth through public procurement. Small Bus Econ 58, 1205–1222 (2022). https://doi.org/10.1007/s11187-021-00466-9

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