The Participation of Young Firms in Public Procurement

Public procurement offers sizable market opportunities for young firms. We investigate the firm- and founder-level characteristics determining young firms’ decision to apply for public tenders, as well as the procurers’ selection of an awardee. We distinguish between observable and unobservable characteristics as well as price-based tenders (tenders awarded solely on the price criterion) and criteria-based tenders (tenders awarded based on additional criteria next to the price). Using representative survey data for 4,314 young firms in Germany, we estimate a multinomial two-stage selection model. In the first stage, firms decide to “not apply,” to “apply for price-based tenders,” or to “apply for criteria-based tenders.” In the second stage, procurers choose the awardee among the applicants of each tender type. We find the firm and founder determinants largely differ with regard to the first and second stage, as well as price- and criteria-based tenders.

Krieger, Bastian, Lena Füner und Prüfer Malte (2025), The Participation of Young Firms in Public Procurement, ZEW Discussion Paper Nr. 25-020, Mannheim.