Rationales of public procurement of innovation: When demand-side instruments address supply-side failures

Public procurement of innovation (PPI) has recently gained a renewed impetus and interest in most OECD countries as well as in the academic literature. A number of scholarly typologies of PPI instruments has been elaborated to understand better their nature and impacts. However, no unified framework that would help understanding and justifying their variety has been provided in the academic literature on PPI, and their economic justification is rather weak. Consequently, our research question is the following: how could an analytical framework unifying the existing literature in terms of economic justification be built? The research methodology consists in a two-step literature survey: first, a comprehensive review of the general literature on innovation policy in order to identify the various theoretical justifications of PPI instruments and to elaborate an analytical framework; second, an analysis of the specific literature on PPI through this analytical framework. Based on the literature survey, the paper considers three groups of rationales for PPI instruments: those respectively on the demand and supply sides, and those relating to traps in users-producers interactions. By combining them, four justification-based categories of PPI instruments and eight subcategories are defined. This framework allows to unify the various typologies in the literature on PPI, and to link design concerns to economic rationales. Moreover, some PPI instruments appear to be hybrid, i.e. justified by both supply- and demand-side rationales.