We discuss public procurement instruments for acquiring innovation, focusing on the European Precommercial
Procurement, Procurement of Innovative Solutions and Innovation Partnerships. We analyse in
particular how the firms’ innovation incentives are affected by: (i) economies of scope and externalities
between R&D and large-scale production; (ii) degree of specificity of the innovation; (iii) presence of Small
and Medium Enterprises (SMEs) in the market and level of market competition; (iv) risk of market foreclosure
and supplier lock-in. Our study contributes to the literature on incentives in demand-side innovation policy
by tapping into the contractual design features and by offering relevant implications for academics and policy
makers.

Keywords: Innovation, Demand-side policies, Incentives, Pre-commercial Procurement, Public Procurement
of Innovative Solutions, Innovation Partnership, Bundling, Rationales