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Public Procurement for Innovation Policy -- Competition Regulation, Market Structure and Dominant Design
Ruyi Wan
PhD Candidate Tsinghua University, SPPM
Visiting Fellow Harvard University, HKS
Jurist Marster Tsinghua University, SOL
Research Background
Research Question & Hypothesis
Literature Review
Empirical Study
Results & Findings
> Recognition rules on indigenous innovation product
> Budget Rules > Review Rules > Contract Management
National S&T Conferece 2006
Mid-Long Term Guideline for S&T Development
MOF 2007: Rules on Government Procurement of Indigenous Innovation Product
Research Background
The Third Sino-US Joint Statement 2011
Lisbon Conference 2000
Kok Report 2004
Aho Report 2006
Europe 2020
European Commission 2007
> Innovation League Innitiative > European Digitalizaion Agenda > Industry Policy in Global Economy > Resource Efficiency Innitative
> Catalogue of indigenous innovation product
Research Question & Hypothesis
Literature Review
Empirical Study
Results & Findings
Research Background
Policy Dilemma of GP Policy for Innovation
Literature Review
• pioneer demand
• user-supply interaction > Strengthened interaction platform (Rolfstam, 2005)
> Sole interaction platform (Lundvall, 1988)
> Scale of the demand
> Sophistication of demand（Beise, 2003; Dalpe, 1992）
Policy Dilemma of GP Policy for Innovation
Literature Review
Procurement Regulation
Demand Driving Force
?
Catalogue
Policy Dilemma of GP Policy for Innovation
Literature Review
Procurement Regulation
Demand Driving Force
?
Policy Dilemma of GP Policy for Innovation
Literature Review
Demand Driving Force
? Independent Variable
Competition Regulation
Policy Dilemma of GP Policy for Innovation
Literature Review
? Independent Variable
Competition Regulation Dependent Variable
Dominant Design
Policy Dilemma of GP Policy for Innovation
Literature Review
Intermediate Varialbe
Market Structure
（Cabral, 2006）
Independent Variable
Competition Regulation Dependent Variable
Dominant Design
Intermediate Varialbe
Market Structure Independent Variable
Competition Regulation Dependent Variable
Dominant Design
Research Question & Hypothesis
Competition Regulation Market Strucuture Dominant Design
Procurement Method
> Open bidding
> Selective bidding
> Restrictive bidding
> Market Concertration
> Market Volume
Suppliers example-market
> How fast the emergence is
> How much the portion is
Research Question & Hypothesis
Literature Review
Empirical Study
Results & Findings
Research Background
Empirical Study
20,641,845 contracts 822,332 IT contracts
DOE DOT DOD DOA FTC FEC FDA ……
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1,113 example markets
Sales
I II III
Introduction Decline
Gompertz Curve and Emerging Dominent Design
Growth Mature
Dependent Variable
Dominant Design
Empirical Study
7040 7022 7020 7042 7021 7025 7010 7050 7035
Procurement Ratio and PLC stage
Sales Introduction Decline Growth Mature
Product Life Cycle
Dependent Variable
Dominant Design
Empirical Study
7040 7022 7020 7042 7021 7025 7010 7050 7035
Sales Introduction Decline Growth Mature
Product Life Cycle
Dependent Variable
Dominant Design
Empirical Study
Procurement Ratio and PLC stage
7040 7022 7020 7042 7021 7025 7010 7050 7035
Sales Introduction Decline Growth Mature
Product Life Cycle
Dependent Variable
Dominant Design
Empirical Study
Procurement Ratio and PLC stage
7040 7022 7020 7042 7021 7025 7010 7050 7035
Sales Introduction Decline Growth Mature
Product Life Cycle
Dependent Variable
Dominant Design
Empirical Study
Procurement Ratio and PLC stage
7040 7022 7020 7042 7021 7025 7010 7050 7035
α β
Sales Introduction Decline Growth Mature
Product Life Cycle
Dependent Variable
Dominant Design
Empirical Study
Procurement Ratio and PLC stage
Research Field Sales Price Profit Supplier Number
Chen & Qiao，2001 Bearing
Gong，2003 household
Zhang & Ding， Car
Lv，2007 Ring
Duan，2012 logistics
Ma，2007 telecommunication
Shi & Lin，2009 mobile
Xiao，2009 chemical
Liu & Lei，2010 household
Liu，2008 traffic
This Study IT product
Common Indicators of Belonging Fuction
Dependent Variable
Dominant Design
Empirical Study
Belonging area of PLC stages
Belonging function of three indicator
Dependent Variable
Dominant Design
Empirical Study
Belonging Area
Stage 1
Stage 2
Stage 3
Stage 4
Belonging Function
indicator 7010 7020 7021 7022 7025 7035 7040 7042 7050
s1 0 0.998 0 1 0 0 1 1 0
s2 0 0 1 0 0 0 0 0 0
s3 0 0 0 0 0.542 0.626 0 0 0.5
s4 0.866 0 0 0 0 0 0 0 0
g1 0 0 0 0 0 0 0 0.5 0
g2 0 0.735 0 0 0 0.941 0 0 1
g3 0 0 0.441 1 0.529 0 0 0 0
g4 0.706 0 0 0 0 0 0.882 0 0
e1 0 0 0 0.876 0 0 1 0 0
e2 0 1 0 0 0 0 0 0.562 0
e3 0 0 0.075 0 1 0 0 0 1
e4 0.682 0 0 0 0 0.382 0 0 0
Belonging degree of three indicators
PLC Stage Belonging function Belonging Degree
Introduction s1 ∩（g4 U g3）∩ e1 UT1（y ）
Growth （s1 U s2）∩（g1 U g2 U g3）∩（e2 U e3） UT2（y ）
Mature （s3 U s4）∩（g2 U g3 U g4）∩（e3 U e4） UT3（y ）
Decline （s2 U s3）∩（g1 U g2）∩ e4 UT4（y ）
Belonging function of Procured IT Products
Dependent Variable
Dominant Design
Empirical Study
UT（y） 7010 7020 7021 7022 7025 7035 7040 7042 7050
Introduction 0 0 0 0.876 0 0 0.882 0 0
Growth 0 0.734 0.033 0 0 0 0 0.281 0
Mature 0.234 0 0 0 0.287 0 0 0 0.211
Decline 0 0 0 0 0 0.363 0 0 0
PLC IT Product Classification Procure Scale Average Price Supplier Number
Introduction 1 7040 55 251291.50 3
Introduction 2 7022 623 175160.38 6
Growth 1 7020 2135 75666.50 11
Growth 2 7042 2109 51311.83 11
Growth 3 7021 6510 151243.88 14
Mature 1 7025 9683 153822.74 29
Mature 2 7010 15704 244562.58 25
Mature 3 7050 9594 118490.74 29
Decline 1 7035 13590 83265.36 38
Belonging Degree of Procured IT Products
PLC of Procured IT Products
Dependent Variable
Dominant Design
Empirical Study
7040 7022 7020 7042 7021 7025 7010 7050 7035
α β
Sales Introduction Decline Growth Mature
Dependent Variable
Dominant Design
Empirical Study
Product Life Cycle
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120
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α
α
0
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9
0 200 400 600 800 1000
β
β
Product Life Cycle
Procurement Scale
α β
α/β
Dependent Variable
Dominant Design
Empirical Study
0
20
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60
80
100
120
140
160
180
200
0 100 200 300 400 500 600 700 800
α/β
Juristication & Approval
Authorization
Threshold
Set-aside
Exceptions
Restrictive Bidding Selective Bidding
Y
N
Y
N
inlet
Market Competition
Open Bidding
Government Shaped Competition
Below threshold
Simplified Procurem
ent
N Y
Independent Variable
Competition Regulation
Open(%) Restrictive(%) Selective(%)
Empirical Study
n，N，i represents Supplier number，ai represents Market Share of Supplier i， A represents Market Volume.
Variable N
Mean Middle St Range Min Max Effective Missing
Supplier Number 1113 0 79.84 21 333.97 4531 1 4532
HHI 1113 0 0.3349 0.2344 0.28222 0.97 0.03 1
Statistic Description of Market Structure
Intermediate Varialbe
Market Structure
Empirical Study
Research Question & Hypothesis
Literature Review
Empirical Study
Results & Findings
Research Background
Results & Findings
Variables Sample
Mean Middle St Range Min Max Effective Missing
Dominent Design
Emerging Efficiency 1113 0 6.3107 2.7692 12.17738 100 0 100
HHI 1113 0 0.3349 0.2344 0.28222 0.97 0.03 1
Supplier Number 1113 0 79.84 21 333.97 4531 1 4532
Open Bidding 1113 0 0.6447 0.7422 0.32729 1 0 1
Selective Bidding 1113 0 0.1684 0.0714 0.24246 1 0 1
Restrictive Bidding 1113 0 0.187 0.0726 0.26436 1 0 1
Statistic description of all variables
Variable HHI Supplier Number
Open Bidding -.225***
(-.206)
-.384**
(-.144)
Selective Bidding .012*
(.020)
.067*
(.047)
Restrictive Bidding .054*
(.094)
-.178**
(-.127)
Constant -2.034*** 2.513***
R2 .081 .018
Adjust R2 .075 .012
F 13.456 2.862
Sample 1113 1113
Results & Findings
Influence of Competition Regulation on Market Structure
Variable Dominent Design Emerging Efficiency
HHI .072*
(.046)
Supplier Number .154**
(.172)
Constant .832***
R2 .032
Adjusted R2 .024
F 3.997
Sample 1113
Results & Findings
Influence of Market Structure on Dominent Design Emerging Efficiency
Influence of competition regulation on HHI in different stage
Variable Intro 1 Intro 2 Growth 1 Growth 2 Growth 3 Mature 1 Mature 2 Mature 3 Decline 1
7040 7022 7020 7042 7021 7025 7010 7050 7035
Open bidding -.001
（-.098） -.001*
（-.055） -.001*
（-.072） .000
（.035） .001
（.022） -.001**
（-.097） -.001*
（-.055） -.002**
（-.078） -.001*
（-.052）
Selective bidding -.004**
（-.221） .000
（.007） .000
（-.012） -.002*
（-.085） -.000
（-.001） -.001
（-.021） .000
（.007） .000
（.009） .001
（.030）
Restrictive bidding .000 （-.030）
.000 （.026）
-.001 （-.054）
.000 （.011）
-.002* （-.078）
-.001* （-.046）
.000 （.026）
-.002** （-.084）
-.001 （-.034）
Constant .856*** .547*** .664*** .594*** .492*** .528*** .547*** .494*** .442***
R2 .058 .132 .007 .009 .007 .011 .004 .012 .005
Adjusted R2 0.031 .017 .001 .005 .002 .007 .000 .009 .002
F 2.146* 1.689 1.126 1.980* 1.538* 3.050** 1.083 3.410*** 1.615*
Sample 109 292 501 631 700 829 826 841 960
Results & Findings
Influence of competition regulation on Number in different stage
Variable Intro 1 Intro 2 Growth 1 Growth 2 Growth 3 Mature 1 Mature 2 Mature 3 Decline 1
7040 7022 7020 7042 7021 7025 7010 7050 7035
Open bidding .023*
（.011） .083***
（.099） .101***
（.097） .083**
（.111） -.533*
（-.092） .609***
（.147） .688***
（.193） .554***
（.146） .762***
（.172）
Selective bidding .185**
（.178） .164*
（.161） .289*
（.128） .177
（.084） .104***
（.072） .600*
（.141） .213
（.028） .204*
（.059） .414
（.035）
Restrictive bidding .033 （.045）
.037 （.056）
.039 （.021）
.041 （.029）
.204* （.045）
.263 （.036）
.042 （.007）
.293* （.046）
.409* （.042）
Constant 1.878** 2.453* 3.776 7.016*** 7.236** 7.137 8.820* 10.682* 10.471
R2 .117 .042 .035 .016 .037 .026 .037 .018 .021
Adjusted R2 .092 .032 .029 .011 .033 .023 .033 .015 .018
F 4.647** 4.192** 5.887*** 3.355** 9.028*** 7.467*** 10.436*** 5.256*** 6.803***
Sample 109 292 501 631 700 829 826 841 960
Results & Findings
Results & Findings
Intermediate Varialbe
Market Structure Independent Variable
Competition Regulation Dependent Variable
Dominant Design
Market Concerntration
Market Volume
Dominant Design
Competition Regulation
1. Market structure shaping is a feasible logic for GP Policy for Innovation.
Results & Findings
Intermediate Varialbe
Market Structure Independent Variable
Competition Regulation Dependent Variable
Dominant Design
Market Concerntration
Market Volume
Dominant Design
Competition Regulation
Results & Findings
Intermediate Varialbe
Market Structure Independent Variable
Competition Regulation Dependent Variable
Dominant Design
Open bidding
Selective bidding
Restrictive bidding
Market Concerntration
Market Volume
Dominant Design
Results & Findings
Intermediate Varialbe
Market Structure Independent Variable
Competition Regulation Dependent Variable
Dominant Design
Open bidding
Selective bidding
Restrictive bidding
Market Concerntration
Market Volume
Dominant Design
2. Open bidding restricts the market shaping function of GP, while Selective & restrictive supports it.
0
0.05
0.1
0.15
0.2
0.25
导入1期 导入2期 成长1期 成长2期 成长3期 成熟1期 成熟2期 成熟3期 衰退1期
完全公开竞争 非完全公开竞争 限制供应商来源的完全公开竞争
Influence on Market Structure
Results & Findings
PLC
3. Selective & restrictive bidding is the major carrier of GP Policy for Innovation, but is only effective at the early stage of technology evolution.
Introduction Decline Growth Mature
Open (-)
Restrictive (+)
Selective (+)
Results & Findings
1. Market structure shaping is a feasible logic for GP Policy for Innovation.
2. Open bidding restricts the market shaping function of GP, while Selective & restrictive supports it.
3. Selective & restrictive bidding is the major carrier of GP Policy for Innovation, but is only effective at the early stage of technology evolution.
Thank you !