SME participation in public purchasing : procurement policy matters

Abstract

This paper investigates the relationship between the quality of regulatory policies governing public procurement and participation in public tenders by small and medium enterprises (SMEs). Using a large dataset on European procurement contracts, we find that countries with better quality procurement regulation have higher SME participation and win ratios. Dividing contracts into smaller lots is associated with greater participation by SMEs, but only increases the probability of SMEs winning contracts for small value lots (€25,000 or less). Counterfactual simulations suggest that if governments want to enhance participation by SMEs in public procurement the focus should be on improving the overall quality of procurement processes.