Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-5c6d5d7d68-wtssw Total loading time: 0 Render date: 2024-08-15T03:08:48.579Z Has data issue: false hasContentIssue false

19 - Procuring innovations

Published online by Cambridge University Press:  04 November 2009

By
Luis Cabral ,
Guido Cozzi ,
Vincenzo Denicolò ,
Giancarlo Spagnolo  and
Matteo Zanza
Edited by
Nicola Dimitri ,
Gustavo Piga  and
Giancarlo Spagnolo
Luis Cabral
Affiliation:
Professor New York University, USA
Guido Cozzi
Affiliation:
Professor University of Macerata, Italy
Vincenzo Denicolò
Affiliation:
Professor University of Bologna, Italy
Giancarlo Spagnolo
Affiliation:
Head of Research Unit Stockholm School of Economics, Sweden
Matteo Zanza
Affiliation:
Consultant Arthur D. Little Global Management, Italy
Nicola Dimitri
Affiliation:
Università degli Studi, Siena
Gustavo Piga
Affiliation:
Università degli Studi di Roma 'Tor Vergata'
Giancarlo Spagnolo
Affiliation:
Stockholm School of Economics
Get access

Summary

Introduction

Innovation is a key source of competitive advantage, for both firms and nations. Though internal research and development (R&D) is widely acknowledged as a primary source of innovation, it is less often remarked that a firm can secure innovative products from its suppliers. Innovative procurement is somewhat hidden in the popular press, but practitioners know all too well that a carefully designed procurement policy is often the key to success in the most innovative markets. The recent history of the Formula One championship nicely demonstrates how crucial the role of suppliers and procurement of innovative goods can be in determining a firm's eventual success or failure. In our ‘age of outsourcing’, in which all non-core activities are increasingly being outsourced, firms must know how best to procure innovative inputs from strategic suppliers. This involves selecting the suppliers, choosing how to reward them, designing property rights for on-demand innovation, and ensuring that suppliers do not gain too much bargaining power, creating hold-up problems.

On the other hand, public procurement can strongly impact firms’ profitability in innovative industries. It is well known, for example, that the US government's defence procurement has been a major driving force for the development of such innovations as large passenger jets, semiconductors, and the Internet. These examples highlight that public procurement mechanisms can play a crucial role in stimulating or hampering private innovative activity.

Type
Chapter
Information
Handbook of Procurement , pp. 483 - 529
Publisher: Cambridge University Press
Print publication year: 2006

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Acemoglu, D. and Linn, J. (2004). ‘Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry’, Quarterly Journal of Economics, 119, 1049–1090.CrossRefGoogle Scholar
Aghion, P., Bloom, N., Blundell, R., Griffith, R., and Howitt, P. (2005). ‘Competition and Innovation: An Inverted U Relationship’, Quarterly Journal of Economics. 120 (2), 701–728.Google Scholar
Aiginger, K., and M. Falk (2005). ‘The Inverted U: New Evidence on the Relationship Between Innovation and Competition’, Working Paper, WIFO (Austrian Institute for Economic Research).
Allen, F., and Gale, D. (1999). ‘Diversity of Opinion and Financing of New Technologies’, Journal of Financial Intermediation, Elsevier, 8 (1–2), 68–89.CrossRefGoogle Scholar
Arrow, K. (1962). ‘Economic Welfare and the Allocation of Resources for Invention’. in Nelson, R. (Ed.), The Rate and Direction of Inventive Activity: Economic and Social Factors, Princeton, NJ: Princeton University Press.Google Scholar
Branscomb, L. and R. Florida (1998). ‘Challenges to Technology Policy in a Changing World Economy’, in Branscomb, L. and Keller, J. (Eds.), Investing in Innovation: Creating a Research and Innovation Policy That Works, Cambridge, MA: MIT Press.Google Scholar
Cabral, L. and T. Kretschmer (2004). ‘Standards Battles and Public Policy’, Working Paper, forthcoming in Greenstein, S. and Stango, V. (Eds.), ‘Standards and Public Policy’. Cambridge UK: Cambridge University Press.Google Scholar
Cabral, L. and Salant, D. (2006). ‘Evolving Technologies and Standardization’, Mimeo, New York and Columbia Universities.Google Scholar
Che, Y. and Gale, I. (2003). ‘Optimal Design of Research Contests’, American Economic Review, 93 (3), 646–671.CrossRefGoogle Scholar
Chiesa, G. and Denicolò, V. (2005). ‘Patents, Prizes and Optimal Innovation Policy’, Mimeo, University of Bologna.Google Scholar
Cowan, R. (1990). ‘Nuclear Power Reactors: A Study of Technological Lock-In’, Journal of Economic History, 50 (Sept) 541–566.CrossRefGoogle Scholar
Cozzi, G. G. and Impulitti, , (2004). Technology Policy and Wage Inequality, Mimeo Rome and New York Universities.Google Scholar
Day, J. R. (1971). Trains, New York: Bantam Books.Google Scholar
Denicolò, V. and Zanchettin, P. (2002). ‘How Should Forward Protection be Provided?’, International Journal of Industrial Organization, 20, 801–827.CrossRefGoogle Scholar
EC, (2004). ‘On the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts’, Directive 2004/18/EC of the European Parliament and of the Council, 31 March.
EU Expert Group (2005). ‘Public Procurement for Research and Innovation’, Report of an Expert Group on measures and actions to assist in the development of procurement practices favourable to private investment in R&D and innovation. Available from http://europa.eu.int/invest-in-research/pdf/report_public_procurement_research_innovation_en.pdf
Fullerton, R. L., Linster, B. G. and McKee, M., (2002). ‘Using Auctions to Reward Tournament Winners: Theory and Experimental Investigations’, RAND Journal of Economics, 33 (I), 62–84.CrossRefGoogle Scholar
Fullerton, R., , L. and McAfee, R. P. (1999). ‘Auctioning Entry into Tournaments’, Journal of Political Economy, 7, (3), 573–605.CrossRefGoogle Scholar
Gompers, P. and Lerner, J. (1999). The Venture Capital Cycle, Cambridge, MA: MIT Press.Google Scholar
Greenstein, S., and Stango, V. (Eds.). Standards and Public Policy, forthcoming, Cambridge: Cambridge University Press, forthcoming.CrossRef
Hart, D. (1998). ‘US Technology Policy: New Tools for New Times’, NIRA Review, Summer, 3–6.Google Scholar
Holbrook, D. (1995). ‘Government Support to Semiconductor Industry: Diverse Approach and Information Flows’, Business and Economic History, 24, (2), Winter.Google Scholar
Kremer, M. (1998). ‘Patent Buyouts, A Mechanism for Encouraging Innovation’, Quarterly Journal of Economics, 113 (4), 1137–1167.CrossRefGoogle Scholar
Langreth, R. (1994). ‘The $30 Million Refrigerator’, Popular Science, 244, 65–7, 87.Google Scholar
Lee, T., and Wilde, L. (1980). ‘Market Structure and Innovation: A Reformulation,’ Quarterly Journal of Economics, 94, 429–436.CrossRefGoogle Scholar
Lewis, T. R. and Talley, E. (2005). ‘Discovery Auctions and Optimal Cumulative Innovation’, Mimeo, Fuqua School of Business, Duke University.
Liebowitz, S., , J. and Margolis, S. E., S. E. (1990). ‘The Fable of the Keys’, Journal of Law & Economics, 33 (1), 1–26 (April).CrossRefGoogle Scholar
Litan, R. E. and Rivlin, A. M. (2001a). The Economic Payoff from the Internet Revolution, Washington DC: Brookings Institution.Google Scholar
Litan, R. E. and Rivlin, A. M. (2001b). ‘Beyond the Dot.coms: The Economic Promise of the Internet’, Washington: Brookings Institution.Google Scholar
Loury, O. (1979). ‘Market Structure and innovation’, Quarterly Journal of Economics, 93.CrossRefGoogle Scholar
Maurer, S., and S. Scotchmer (2004). ‘Procuring Knowledge’, in Libecap, G. (Ed.), Intellectual Property and Entrepreneurship: Advances in the Study of Entrepreneurship, Innovation and Growth, vol. 15, 1–31. The Netherlands: JAI Press (Elsevier).Google Scholar
Menell, P. and S. Scotchmer (2006). ‘Intellectual Property’, in Polinsky, M. and Shavell, S. (Eds.), Handbook of Law and Economics. Vol. 1 Amsterdam: Elsevier.Google Scholar
Mill, J. S. (1872). Principles of Political Economy with Some of Their Applications to Social Philosophy, Boston: Lee & Shephard.Google Scholar
Ruttan, V. (2005). ‘Military Procurement and Technology Development’, Working Paper, Department of Applied Economics College of Agricultural, Food, and Environmental Sciences University of Minnesota.
Scotchmer, S. (1991). ‘Standing on the Shoulders of Giants: Cumulative Research and the Patent Law’, Journal of Economic Perspectives, 5, 29–41.CrossRefGoogle Scholar
Scotchmer, S. (1999). ‘On the Optimality of the Patent Renewal System’, Rand Journal of Economics, 30 (2), 181–196.CrossRefGoogle Scholar
Scotchmer, S. (2004). Innovation and Incentives, Cambridge, MA: MIT Press.Google Scholar
Sobel, D. (2005). ‘Longitude: The True Story of a Lone Genius Who Solved the Greatest Scientific Problem of His Time’, New York: Penguin.Google Scholar

Save book to Kindle

To save this book to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×