Breaking Tech Monopolies
The Role of Public Procurement in Fostering SME-Led Innovation in Europe
DOI:
https://doi.org/10.59490/dgo.2025.973Keywords:
Public Procurement, Digital Government, Startups, GovTech, SME, InnovationAbstract
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.
Downloads
References
Albano, G. L., Ballarin, A., & Sparro, M. (2010). Framework agreements and repeated purchases: The basic economics and a case study on the acquisition of it services. SSRN Electronic Journal. DOI: https://doi.org/10.2139/ssrn.2534496
Amann, M., & Essig, M. (2015). Public procurement of innovation: Empirical evidence from EU public authorities on barriers for the promotion of innovation. Innovation: The European Journal of Social Science Research, 28(3), 282–292. DOI: https://doi.org/10.1080/13511610.2014.998641
Arosa, D., Arribas, I., & Vila, J. (2025). Negative effects on SMEs’ success rates when framework agreements are used in bidding for public contracts. Public Money & Management, 45(1), 53–61. DOI: [https://doi.org/10.1080/09540962.2024.2312223]
Bauer, L. T. (2025). Commercialization for public value: A path for civic technology innovation to diffuse into public administrations [Verfügbar auf Google Scholar: [link]. 1st Symposium on Data Driven Smart Government.
Bharosa, N. (2022). The rise of govtech: Trojan horse or blessing in disguise? a research agenda. Government Information Quarterly, 39, 101692. DOI: https://doi.org/10.1016/j.giq.2022.101692
Bharosa, N., & Janowski, T. (2024). The GovTech Challenge ?V GovTech and Public Value Creation. Proceedings of the 25th Annual International Conference on Digital Government Research, 1043–1045. DOI: https://doi.org/10.1145/3657054.3659125
Chicot, J., & Matt, M. (2018). Public procurement of innovation: A review of rationales, designs, and contributions to grand challenges. Science and Public Policy, 45(4), 480–492. DOI: https://doi.org/10.1093/scipol/scy012
Commission, E. (1990). Promoting SME participation in public procurement in the Community. Communication from the Commission to the Council. COM (90) 166 final, 7 May 1990 [Num Pages: 16].
Commission, E. (2022). Regulation (eu) 2022/1925 of the european parliament and of the council of 14 september 2022 on contestable and fair markets in the digital sector and amending directives (eu) 2019/1937 and (eu) 2020/1828 (digital markets act).
Commission, E. (2024). Regulation (eu) 2024/903 of the european parliament and of the council of 13 march 2024 laying down measures for a high level of public sector interoperability across the union (interoperable europe act).
Edler, J., & Georghiou, L. (2007). Public procurement and innovation—Resurrecting the demand side. Research Policy, 36(7), 949–963. DOI: https://doi.org/10.1016/j.respol.2007.03.003
Edquist, C., & Hommen, L. (2000). Public Technology Procurement and Innovation Theory [Series Title: Economics of Science, Technology and Innovation]. In C. Antonelli, B. Carlsson, C. Edquist, L. Hommen, &
L. Tsipouri (Eds.), Public Technology Procurement and Innovation (pp. 5–70). Springer US. DOI: https://doi.org/10.1007/978-1-4615-4611-5_2
Edquist, C., & Zabala-Iturriagagoitia, J. M. (2012). Public procurement for innovation as mission-oriented innovation policy. Research Policy, 41, 1757–1769. DOI: https://doi.org/10.1016/j.respol.2012.04.022
’European Union’. (n.d.). tenders electronic daily [Accessed: 31 Jan. 2025]. [link]
Flynn, A., McKevitt, D., & Davis, P. (2015). The impact of size on small and medium-sized enterprise public sector tendering. International Small Business Journal: Researching Entrepreneurship, 33(4), 443–461. DOI: https://doi.org/10.1177/0266242613503178
Georghiou, L., Edler, J., Uyarra, E., & Yeow, J. (2014). Policy instruments for public procurement of innovation: Choice, design and assessment. Technological Forecasting and Social Change, 86, 1–12. DOI: https://doi.org/10.1016/j.techfore.2013.09.018
Geroski, P. (1990). Procurement policy as a tool of industrial policy. International Review of Applied Economics, 4(2), 182–198. DOI: https://doi.org/10.1080/758523673
Glas, A. H., & Eßig, M. (2018). Factors that influence the success of small and medium-sized suppliers in public procurement: Evidence from a centralized agency in Germany. Supply Chain Management: An International Journal, 23(1), 65–78. DOI: https://doi.org/10.1108/SCM-09-2016-0334
Gleiss, A., Degen, K., & Pousttchi, K. (2023). Identifying the patterns: Towards a systematic approach to digital platform regulation. Journal of Information Technology, 38, 180–201. DOI: https://doi.org/10.1177/02683962221146803
Grandia, J., & Meehan, J. (2017). Public procurement as a policy tool: Using procurement to reach desired outcomes in society. International Journal of Public Sector Management, 30, 302–309. DOI: https://doi.org/10.1108/IJPSM-03-2017-0066
Gunasekaran, A., & Ngai, E. W. T. (2008). Adoption of e-procurement in hong kong: An empirical research. International Journal of Production Economics, 113(1), 159–175. DOI: https://doi.org/10.1016/j.ijpe.2007.04.012
Harland, C. M., Eßig, M., Lynch, J., & Patrucco, A. (2021). Policy-led public procurement: Does strategic procurement deliver? [Publisher: Emerald Publishing Limited]. Journal of Public Procurement, 21(3), 221–228. DOI: https://doi.org/10.1108/JOPP-09-2021-089
Hoekman, B., & Taş, B. K. O. (2022). Procurement policy and SME participation in public purchasing. Small Business Economics, 58(1), 383–402. DOI: https://doi.org/10.1007/s11187-020-00414-z
’Innovation Agency Lithuania’. (n.d.). GovTech Lab [Accessed: 31 Jan. 2025]. [link]
Isenberg, D. (2010). How to start an entrepreneurial revolution. Harvard Business Review, 88(6), 40–50. [link]
Jácome de Moura, P., dos Santos Junior, C. D., Porto-Bellini, C. G., & Dias Junior, J. J. L. (2024). The Over-Concentration of Innovation and Firm-Specific Knowledge in the Artificial Intelligence Industry. Journal of the Knowledge Economy. DOI: https://doi.org/10.1007/s13132-024-01974-1
Klassen, G., Bauer, L. T., Fritzsche, R. J., Kordyaka, B., & Niehaves, B. (2024). Turning tenders into tinder: How ai and open data can spark bidding matches. In M. Wimmer, M. Räckers, & H. Hünemohr (Eds.), Fachtagung rechts-und verwaltungsinformatik (rvi 2024) (pp. 137–148). Lecture Notes in Informatics (LNI), Gesellschaft für Informatik, Bonn.
Lukkien, B., Bharosa, N., & Reuver, M. D. (2023). Barriers for developing and launching digital identity wallets. Proceedings of the 24th Annual International Conference on Digital Government Research, 289–299. DOI: https://doi.org/10.1145/3598469.3598501
Lundvall, B.-Å. (1992). National systems of innovation: Towards a theory of innovation and interactive learning. Pinter Publishers.
Moodyś. (n.d.). Orbis Database [Accessed: 31 Jan. 2025]. [link]
Mowery, D., & Rosenberg, N. (1979). The influence of market demand upon innovation: A critical review of some recent empirical studies. Research Policy, 8(2), 102–153. DOI: https://doi.org/10.1016/0048-7333(79)90019-2
Neupane, A., Soar, J., Vaidya, K., & Yong, J. (2012). Role of public e-procurement technology to reduce corruption in public procurement. International Journal of Information Technology & Management, 11(4), 273–284. DOI: https://doi.org/10.1504/IJITM.2012.049730
Niehaves, B., Klassen, G., & Manzoni, M. (2024). GovTech: Influencing factors, common requirements and recommendations - Supporting the development of cross-border, interoperable GovTech practices in the European landscape (tech. rep. KJ-01-24-133-EN-N (online),KJ-01-24-133-EN-C (print)) [ISBN: 978-92-68-21888-4 (online),978-92-68-21889-1 (print) ISSN: 1831-9424 (online),1018-5593 (print)]. Publications Office of the European Union. Luxembourg (Luxembourg). DOI: https://doi.org/10.2760/1598146(online) https://doi.org/10.2760/3930235(print)
Nose, M. (2023). Inclusive govtech: Enhancing efficiency and equity through public service digitalization, International Monetary Fund.
Nyiri, L., Osimo, D., Özcivelek, R., Centeno, C., & Cabrera, M. (2007). Public Procurement for the Promotion of R&D and Innovation in ICT.
OECD. (2018). SMEs in Public Procurement.
PUBLIC., the Lisbon Council., Politecnico Milano., & Intellera. (n.d.). GovTech Connect [Accessed: 31 Jan. 2025]. [link]
Rikap, C., Durand, C., Paraná, E., Gerbaudo, P., & Marx, P. (2024). Reclaiming digital sovereignty: A roadmap to build a digital stack for people and the planet. UCL Institute for Innovation and Public Purpose.
Rikap, C., & Lundvall, B.-Å. (2021). The Digital Innovation Race: Conceptualizing the Emerging New World Order. Springer International Publishing. DOI: https://doi.org/10.1007/978-3-030-89443-6
Roberts, H., Cowls, J., Casolari, F., Morley, J., Taddeo, M., & Floridi, L. (2021). Safeguarding European Values with Digital Sovereignty: An Analysis of Statements and Policies. DOI: https://doi.org/10.2139/ssrn.3937345
Rothwell, R. (1984). Technology-Based Small Firms and Regional Innovation Potential: The Role of Public Procurement. Journal of Public Policy, 4(4), 307–332. DOI: https://doi.org/10.1017/S0143814X00002774
Sanchez Graells, A., & Herrera Anchustegui, I. (2014). Impact of Public Procurement Aggregation on Competition: Risks, Rationale and Justification for the Rules in Directive 2014/24. SSRN Electronic Journal. DOI: https://doi.org/10.2139/ssrn.2534496
Soliño, A. S., & de Santos, P. G. (2010). Transaction costs in transport public–private partnerships: Comparing procurement procedures. Transport Reviews, 30(3), 389–406. DOI: https://doi.org/10.1080/01441640903037941
Timmermans, B., & Zabala-Iturriagagoitia, J. M. (2013). Coordinated unbundling: A way to stimulate entrepreneurship through public procurement for innovation. Science and Public Policy, 40(5), 674–685. DOI: https://doi.org/10.1093/scipol/sct023
’United Nations’. (n.d.). UN Treasury - UN Operational Rates of Exchange [Accessed: 31 Jan. 2025]. [link]
Uyarra, E., Edler, J., Garcia-Estevez, J., Georghiou, L., & Yeow, J. (2014). Barriers to innovation through public procurement: A supplier perspective. Technovation, 34(10), 631–645. DOI: https://doi.org/10.1016/j.technovation.2014.04.003
Vaidya, K., Sajeev, A. S. M., & Callender, G. (2006). Critical factors that influence e-procurement implementation success in the public sector. Journal of Public Procurement, 6(1-3), 70–99. DOI: https://doi.org/10.1108/JOPP-06-01-03-2006
Vardanyan, L., & Kocharyan, H. (2023). Critical views on the phenomenon of EU digital sovereignty through the prism of global data governance reality: Main obstacles and challenges. European Studies, 9(2), 110–132. DOI: https://doi.org/10.2478/eustu-2022-0016
Wesseling, J. H., & Edquist, C. (2018). Public procurement for innovation to help meet societal challenges: A review and case study. Science and Public Policy, 45(4), 493–502. DOI: https://doi.org/10.1093/scipol/scy013
Downloads
Published
How to Cite
Conference Proceedings Volume
Section
License
Copyright (c) 2025 Jan Westermann, Gerhard Klassen, Luca T. Bauer, Robin Fritzsche
This work is licensed under a Creative Commons Attribution 4.0 International License.
