Abstract
The potential role of public procurement in the process of innovation and diffusion can be derived from the history of several industries. Our theoretical framework develops the concept of public demand- pull in terms of quantity (allowing a stable market for new products) and quality (contracts with strong and open performance tions). Furthermore, innovation and diffusion tend to take place in close informal working relationships between public users and suppliers. The paper develops the conditions under, which public procurement can be a tool of technology policy. Procurement tends to be most efficient in the early stages of the product life cycle, when public purchasing agencies have sufficient monopsony power and act as friendly buyers and quality leaders.
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