Effects of public procurement contract on firm product and service innovation – case study of Czechia, Slovakia and Norway

Abstract

The public sector economy accounts for a large size of the National market demand for goods and services. Many scholars have tipped public procurement as an attractive measure to help boost innovation in firms for the state to achieve its innovation goals. But there has been a worrying case mainly by actors within the public sector and scholars to explore this policy instrument to support innovation. In light of the above, the research seeks to analyze the effect of public procurement contracts on the firm’s product and service innovation. Using logistic Regression model for the CIS 2014 data we analyze this effect in the case of the Czech Republic, Norway and Slovakia. Our empirical results showed that, the use of this policy instrument is dependent mostly on the type of innovation. We found that firms received contracts to execute projects from the public sector for service provision in all cases but in the case of product innovation, only Czech Republic firms did receive a public contract. Nevertheless, innovation was required when firms are contracted to provide services for the public sector only in the Czech Republic and Slovakia regarding product innovation.