Facilitating Access for Innovative Start-Ups to the Procurement Market: The Potential of Criteria-Based Contract Awards
ZEW policy brief No. 26-12 // 2026Strengthening private-sector innovation is considered a key prerequisite for Germany’s and Europe’s long-term competitiveness. Public procurement can serve as an instrument in this regard, but it has so far been undervalued. Equivalent to roughly 18 per cent of Germany’s GDP, it is one of the largest demand-side instruments in government innovation policy. Start-ups can benefit from successful bids in two ways: contract awards secure initial demand, and they provide a signal of quality to customers and investors. A new academic study based on 4,260 young German companies aged seven years or less shows that 16.3 per cent of young firms have submitted at least one bid for a public tender since their foundation, with 10.4 per cent having been a warded at least one contract. The study also shows that the relevance of public procurement to innovation is closely linked to the design of the individual tender. Criteria-based awards incorporating additional quality, environmental or innovation criteria are linked to more frequent applications and a higher success rate among innovation-oriented young companies. Within existing procure ment practice, they can serve as a pathway for start-ups with an innovation profile to access the procurement market. In contrast, contract awards without criteria that go beyond price show no correlation whatsoever with the innovative characteristics of young companies but are associated exclusively with indicators of resource strength.