Does Green Public Procurement Trigger Environmental Innovation?

Abstract

This paper provides first empirical insights on the relationship between green public procurement and firms’ environmental innovation outputs. Considering that the public sector is a large buyer in the economy, strategic public procurement can work as demand-pull factor for new products and processes. Green public procurement aims at contributing to more sustainable production and consumption. Using a novel firm-level dataset, this paper analyses within a difference-in-differences setup whether green public procurement is able to trigger environmental innovations or not. Our results support a demand-pull effect of green public procurement on the probability of introducing environmental product innovations: The probability of introducing a new and more environmentally friendly product is on average around 19 percentage points higher for firms receiving a green public procurement contract. We find no significant relationship between green public procurement and the probability of introducing new and more environmentally friendly production processes.