2017/20 | LEM Working Paper Series | ||||||||||||||||
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The demand-pull effect of public procurement on innovation and industrial renewal |
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Francesco Crespi and Dario Guarascio |
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Keywords | |||||||||||||||||
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Public procurement, innovation policy, demand-side innovation policy
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JEL Classifications | |||||||||||||||||
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O25, O30, O31, O49
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Abstract | |||||||||||||||||
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This article analyzes, empirically, the link between public
procurement and innovation activities by taking into account the
moderating effect played by import penetration on public
procurement. Using industry-level information on patent applications
for 24 countries over the period 1995-2012, we test the impact of
public procurement on innovation activities and whether and in which
direction import penetration on public procurement impacts on
patenting. The econometric analysis relies on Poisson regression
techniques aiming to investigate the correlation between patent
counts, supply as well as demand-side determinants, controlling for
country and sector heterogeneity. The obtained results confirm our
main hypotheses. The dynamics of patenting is positively affected by
the public procurement while a high degree of import penetration
reduces the innovation enhancing effect exerted by public demand. Our
results suggest that public demand may represent an effective tool for
industrial policy to stimulate innovative activities, to shape the
transformation of production systems and to foster industrial
renewal. Moreover, the empirical evidence shows that the strategy
regarding the degree of openness in public procurement towards
non-domestic firms is a crucial policy choice capable of affecting the
innovative potential of public demand.
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