No. 26




Public Procurements and Innovation in Estonia: Why Spend 11 Million Euros per Day? *

19 December 2012


RiTo No. 26, 2012

  • Veiko Lember

    Senior Researcher of the Institute of Public Administration, Tallinn University of Technology

  • Tarmo Kalvet

    Senior Researcher of the Institute of Public Administration, Tallinn University of Technology

The idea of innovation-based public procurements is mostly based on the belief that the public sector that is active in the market and that has a great purchase capability can influence the market participants through demand.

In 2010, Estonia’s public sector spent around 11 million euro per workday on procurements. Although support of innovation through public procurements is stressed in several strategies (first and foremost „Knowledge-based Estonia 2007–2013” and „Development Plan of Estonian Information Society 2013”), no concrete measures have been established, and the awareness is low.

On the basis of interviews and extensive questioning of entrepreneurs, it can be said that public procurements have a modest impact on the innovation of companies in Estonia: few new products, services or production processes are being developed due to participating in a public procurement or as the result of fulfilling a contract entered into with the public sector. Public procurements have influenced innovation in the field of information technology and communication, although the innovation-friendliness of the public sector (through public procurements) has lessened. In general, innovation is being hindered by the price pressure of public procurements and the low capability level of the supplier.

The authors analyze possible political alternatives through four possibilities: innovation-supporting public procurement as technology policy, as research and development policy, as cross-dimensional innovation-supporting public procurement policy, and as a conscious policy of non-intervention. Considering the restrictions existing in Estonia, as well as the potential impact of such political measures, the authors recommend turning to the first scenario. According to that, the state remains a conscious policymaker and promoter of development of technology in the fields where it has a great purchasing capability, a larger than average experience in technology, or where it sees the social-economic potential of developing of clusters and networks. In many countries where strong bonds between public procurements and innovation have become established, public procurements are connected with the objectives of the policy in specific areas (e.g. security, welfare, energy).

*Peer reviewed research paper.

Full article in Estonian