Incentives and risk-sharing in public procurement of innovations

Abstract

Purpose Public procurement of innovations (PPIs) addresses a specified need of the public-sector customer or aims at fostering private firms’ innovativeness. In an operational sense, issues of information asymmetry and risk sharing between the public agency and the supplier are of paramount importance. The purpose of this paper is to focus on the contract design issues of PPI. Design/methodology/approach Explicit and implicit contracting methods are reviewed, and a conceptual framework is proposed in which procurement characteristics are analyzed, focusing on the dimensions of the supplier’s sensitivity to the procurement risk and the power of implicit contracting methods. Findings Because of its complex nature, applying cost-plus contracts instead of more common fixed-price contracts is advisable in PPI. Originality/value Possible reasons for the more prominent role of contract design in the USA as opposed to the European Union procurement are discussed.

Policy-led public procurement: does strategic procurement deliver?

“…In his study, Selviaridis (Paper 1) focuses attention on the role that pre-commercial procurement (PCP) plays in influencing activities, capabilities and behaviours of actors participating in the public innovation process. While prior PCP research is underpinned by theoretical frameworks of market failure (Suhonen et al, 2019), this article examines the role and capacity of PCP in addressing systemic failures impeding the process of innovation. The author finds that, thanks to public funding initiatives (i.e.…”

“…Instead of arguing that regulation is the "only" way to implement policy goals in contract awarding procedures, a systematic approach is required to embrace public supplier performance management, including broader aspects of public procurement, such as supply market knowledge, collaborative relationships and long-term orientation (Loader, 2007;Keränen, 2017;Suhonen et al, 2019;Wesseling and Edquist, 2018;Uenk and Telgen, 2019). The articles in this special issue deliver important findings which we hope will encourage opportunities for further research.…”

Exports or public procurement to resist in the post-pandemic world? How e-commerce appeases this food and beverage SMEs ambidextrous dilemma

“…However, SMEs’ participation in public procurement contracts is limited (Loader, 2011; Reijonen et al. , 2022; Saastamoinen et al ., 2017, 2020; Suhonen et al. , 2019).…”

“…This is because the exploration and comprehension of public procurement policies and contracts often requires resources which are not widely available within F&B SMEs (Loader, 2011; Reijonen et al. , 2022; Saastamoinen et al ., 2017, 2020; Suhonen et al. , 2019).…”

Risk managing contractual routes to effective innovation procurement

“…In the never-ceasing search for innovation that organizations across the globe are engaged in, public organizations are playing their part by stimulating innovation when they procure services from outside companies. A research paper by Suhonen et al (2019) concentrates on the strategic contract design options and conceptual framework that underpin the public procurement of innovations (PPI). The paper focuses upon PPI within the EU.…”