Breaking Tech Monopolies

The Role of Public Procurement in Fostering SME-Led Innovation in Europe

Abstract

The growing dominance of large technology companies in Europe’s digital markets raises concerns about innovation concentration, limited competition, and reduced technological sovereignty. Public procurement represents a powerful yet underutilized instrument to address these dynamics by enabling smaller firms to compete, innovate, and scale within critical sectors. This study examines how public procurement can strengthen innovation capacity and economic diversity in the European information and communication technology sector. Focusing on the participation of startups and small businesses, we provide large-scale empirical evidence on structural barriers and market concentration in cross-border procurement practices. Our study
reveals that public procurement systems often reproduce existing power asymmetries, despite policy ambitions to foster inclusivity and competition. Our findings highlight the significance of procedural complexity, limited outreach, and insufficient institutional capacity as key obstacles to startup participation. Moreover, we show that small and medium sized companies are far from homogeneous, necessitating targeted policy responses rather than uniform support measures. By framing startup inclusion as a systemic condition for innovation and digital sovereignty, the study contributes to ongoing theoretical debates on demand-side innovation policy and strategic governance. It also offers actionable insights for policymakers and procuring agencies aiming to design inclusive, innovation-oriented procurement ecosystems. In doing so, the study advances the academic discourse on public procurement and provides practical insights to support a more competitive and resilient European ecosystem by leveraging public procurement volume.