Commitment 17 of the European Union’s Innovation Union flagship aims at strengthening the capacity of public procurement to act as policy tool to enhance innovation across Europe. The underlying idea is that public procurement creates demand-driven incentives for firms to engage in innovation-related activities.

The revision of EU directives related to public procurement facilitates (i) the procurement of innovative products and (ii) splitting large projects into bite-sized chunks, which reduces the barrier for small and medium-sized enterprises (SMEs) to participate in procurement calls. This line of research will therefore investigate whether the new EU directive  leads to increased innovation in the business sector, especially in SMEs. In addition, we examine whether the new policy enhances participation rate of SMEs and whether it increases performance levels of participating firms.