Edler, J., & Georghiou, L. (2007). Public procurement and innovation—Resurrecting the demand side. Research policy, 36(7), 949-963.

The article is well introduced with the presence of an informative abstract. The article title” Public procurement and innovation resurrecting the demand side” (Edler & Georghiou, 2007)  is a good representation of what the article is all about.  It discusses public procurement as one of the key elements of a demand-oriented innovation policy. The rationales and justifications of public procurement policies to spur innovation are discussed. It concludes by confronting the public procurement approach with two of the most common objections to it and by considering future prospects.

According to Edler & Georghiou (2007), Demand is a major potential source of innovation yet the critical role of demand as a key driver of innovation has still to be recognized in government policy. If public demand is oriented towards innovations in products and solutions, it has the potential to advance the delivery of public services and policy. However, Edler & Georghiou (2007) asserts that the use of procurement as an innovation policy has been downplayed for many years. In a more recent survey of more than 1000 firms and 125 federations, over 50% of respondents indicated that new requirements and demand are the main source of innovations, while new technological developments within companies are the major driver for innovations in only12% of firms (Edler & Georghiou, 2007).

At European Union level a new interest has emerged in the meaning of demand-side approaches to innovation and, more concretely, in the use of public demand as an engine for innovation. In 2004, Germany, UK and France issued a position paper to the European Council. It included a call for the use of public procurement across Europe to stimulate innovation. In September 2006, the Commission issued a strategic innovation policy paper highlighting the importance of public procurement for innovation and the creation of lead market, especially in sectors in which the state is an important purchaser.

Public procurement in the context of innovation policy instruments

Since the early 90’s, innovation policy has been alleged to improve the innovation systems performance. As well as explicit innovation policies, many other measures such as macroeconomic policies, education more generally, regulation and competition policy affect innovation, though this is not their main object. Crucially this group also includes public procurement.

An economic rationale for modernization policy rest on two main foundations, which are market, and system failures, which in some senses compete and in others are complements each other. The innovation systems perspective emphasizes the significance of having a large and differentiated group of innovation actors and an enabling framework for learning-oriented interactions between them (Edler & Georghiou, 2007). Thus, policy is primarily aimed at optimizing the interaction of various components of the system including industry, basic research, applied research, financing and demand and at creating innovation-friendly framework conditions.

Forms of public procurement

Edler & Georghiou (2007), there are two levels of procurement that can be distinguished in state procurement. These are general and strategic procurement. Government procurement is organized such that innovation becomes a necessary criterion in the call for tender and appraisal of tender documents. As a rule, central procurement offices are generally responsible for procurement. They are located either in ministries of the interior or finance, but not in the ministries responsible for innovation policy.

On the other hand, strategic procurement, occurs when the demand for certain products, technologies or services is encouraged to stimulate the market. Strategic procurement is associated with sectoral policy and thus not initiated nor coordinated by the ministries responsible for innovation. A systematic utilization of both forms of government procurement calls for coordinated action. (Edler & Georghiou, 2007).

State procurement in connection with private users

 There are procurement strategies where the state buys, not only to fulfill its own mission, but also to support private purchasers in the decision to buy. This kind of strategy is known as co-operative procurement occurs when government agencies buy jointly with private purchasers and both utilize the purchased innovations. Catalytic procurement occurs when the state is involved in the procurement or even initiates it, but the purchased innovations are eventually used solely by the private end-user (Edler & Georghiou, 2007). The crucial feature of catalytic procurement is that while the state often itself appears as buyer, the real market penetration effect is achieved by subsequent private demand.

Rationales for applying public procurement as an innovation policy tool

Public procurement is a major part of locally available demand, which constitutes a major factor in the inclination to generate innovations in a given location. In addition, there is a range of market and system failures affecting the translation of needs into functioning markets for innovative products, and public procurement can prove effective in redressing this. Again, the purchases of innovative solutions offer a strong potential for improving public infrastructure and public services in general (Edler & Georghiou, 2007). Domestic demand is a prime source for enhancing the competitiveness of locations and the enterprises therein. Next to factor endowment, the industrial structure, and firm, sophisticated and challenging demand is one of four key variables determining the attractiveness and performance locations. Edler & Georghiou

Implementation framework for innovation procurement policy

Despite the strong interest in procurement for innovation, it does require certain circumstances conducive for it to succeed. One requirement coordination across government. this helps to resolve the problem of social returns not necessarily being within the sphere of the purchasing ministry. It is also notable that combination with private demand provides an additional aspect to procurement policy (Edler & Georghiou, 2007). In addition to these structural requirements, there is also a need for changed practice at the level of the procurement professional. To overcome the challenge and to reap the benefits of public procurement in terms of innovation generation and diffusion, a complex implementation framework needs to be put in place.

The main aim of the article was to explain how the public procurement could be used to create innovation policies. It explains public procurement from different perspectives. However, Edler & Georghiou,(2007) assumes that there is a specific ministry that deals with public procurement. In our country Kenya, every ministry does its own procurement department with its own strategies.

With this kind of system, coordination of public procurement becomes difficult. The kind of system demonstrated by Edler & Georghiou (2007) is not widely applied by many countries. This is mainly because it requires a lot of coordination within the different ministries. Coordination especially in Africa is a big problem making this kind of system difficult to implement. In addition, the idea that Government procurement is organized such that innovation becomes a necessary criterion in the call for tender and appraisal of tender documents does not always hold. In some countries, public procurement is not innovative in any way. It  follows the same trend year after year.

References

Edler, J., & Georghiou, L. (2007). Public procurement and innovation—Resurrecting the demand side. Research policy, 36(7), 949-963.

 
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