When can green public procurement really stimulate eco-innovation? Considering the role of intellectual capital

Abstract

Green public procurement (GPP), as a demand-side environmental policy tool, has advantages in mitigating underinvestment in eco-innovations. However, the innovation effects of green procurement remain a subject of debate, empirical studies of this policy across sectors and regions remain insufficient either. This study uses European country-level panel data to empirically investigate how adding green keywords to the contract award criteria for public procurement promotes eco-innovation. It also explores the potential moderating role of intellectual capital on this effect. The finding shows that the impact of GPP on eco-innovation is U-shaped, with innovation being stimulated only when the proportion of green contracts exceeds a certain turning point, which ranges from 16% to 50% among studied samples. Human capital significantly reduces this threshold due to its ability to mitigate knowledge scarcity. The innovation effect is more pronounced in the sectors with service inclination. Western European countries, having implemented National Action Plans earlier, have a lower required threshold, whereas Central and Eastern European Countries (CEEC), with higher procurement intensity, exhibit stronger marginal effects.