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Green public procurement has gained high political priority and is argued to be an effective demand-side policy to trigger environmental innovations. However, the empirical evidence on its innovation impact is limited. We construct a novel firm-level dataset to investigate the effect of winning public procurement tenders with additional environmental award criteria on firms’ introduction of environmental innovations. Employing cross-sectional difference-in-differences methods, we find that winning public procurement awards with environmental selection criteria increases a firm's probability of introducing more environmentally friendly products on average by 20 percentage points. We show that this effect is driven by small and medium-sized firms and is not statistically significant for larger firms. Furthremore, there is no statistically significant effect on the introduction of more environmentally friendly processes.
Krieger et al. (Tue,) studied this question.