Public Procurement for Indigenous Innovation: A Case Study of the Chinese New Energy Vehicle Program

Abstract

The purpose of this research is to explore the underlying mechanism for public procurement as a demand-side innovation policy to impact indigenous innovation in China, using a case in the New Energy Vehicles Program. With regard to approach, this study takes a critical realism perspective and adopts a qualitative case study approach. Government policies and political statements are collected from newspapers, annual reports and official websites of organizations. In addition, numeric figures used in this study are collected from mainstream databases and adapted from academic articles. Through a thorough analysis, this study finds out as a demand-side innovation policy instrument, public procurement can contribute to China’s indigenous innovation blueprint in four major ways. Specifically, public procurement can create a new market for off-the-shelf products with its tremendous purchasing power; in addition, it transfers required resources (e.g. money, knowledge, talents) to innovation activities; in addition, it brings competition to the market and accelerates the diffusion of innovation into society. Going forward, we identified three key factors that affect the effectiveness of public procurement for indigenous innovation. Firstly, it is important for procurers to specify objectives of procurement. Although local and central governments may differ in specific goals that they pursue through procured products or solutions, they also have common targets. The ideal situation is that the goal of regional governments is consistent to that of the central government. Secondly, the author found, an efficient and transparent procurement system is a critical premise. Last but not least, cooperation is a key to generate indigenous innovation through procurement, which requires a close collaboration across sectors and regions to jointly contribute to the blueprint of indigenou innovation.