Start-ups: Potential of Public Tenders Remains Unused
Research
05.12.2024
Only Seven per Cent of German Start-Ups Are Awarded Public Contracts
A recent study by ZEW Mannheim analyses to what extent start-ups participate in public tenders and win them. The study revealed that eleven per cent of German start-ups have been involved in public tenders since they were founded and seven per cent were awarded at least one contract. However, the number of established companies winning a tender is more than twice as high. The study is based on a representative survey of around 5,000 start-ups in Germany which was conducted in 2022.
“Fewer start-ups than expected bid for public contracts. Compared to earlier studies, we are now seeing a significantly lower number of bidders,” explains Dr. Bastian Krieger, head of ZEW Mannheim’s junior research group “Co-Creation” and co-author of the study. “Start-ups could considerably benefit from the allocation of public contracts. With their often innovative products and services, start-ups have a special potential to advance the German economy in the long term. But their chance of success in tender processes tends to be small and this shows that the potential is not realised.”
Public contracts have a big impact
Public tenders are interesting for start-ups not only from a financial perspective. They build the trust of potential customers in the young business and are perceived as a quality certification. If a start-up wins a bid, this can serve as a stepping stone for market expansion and demonstrate the functionality of its products and services.
“The public procurement law reform aims to improve the chance of success for young enterprises in public tenders. Above all, the objective is to increase the number of direct contract awards to start-ups. This – besides reducing bureaucracy and promoting innovation – is a promising approach,” adds Krieger.
Expertise differs between younger and more established start-ups
Younger start-ups that focus on tenders with additional award criteria tend to have a high innovation capability and extensive industry knowledge, whereas more established start-ups with larger founding teams are often leading in tenders with an exclusive focus on price. The latter require fewer innovation skills and this gives seasoned businesses with established structures an edge over the younger entrepreneurs.
