Market orientation and smesʼ activity in public sector procurement participation
| Date | 01 March 2014 |
| DOI | https://doi.org/10.1108/JOPP-14-03-2014-B001 |
| Published date | 01 March 2014 |
| Pages | 304-327 |
| Author | Timo Tammi,Jani Saastamoinen,Helen Reijonen |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue |
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 14, ISSUE 3, 304-327 FALL 2014
MARKET ORIENTATION AND SMES’ ACTIVITY IN PUBLIC SECTOR
PROCUREMENT PARTICIPATION
Timo Tammi, Jani Saastamoinen and Helen Reijonen*
ABSTRACT. Small and medium enterprises (SMEs) have been found to be
under-represented in the awarding of public sector procurement contracts.
Currently, very little is known about the strategic and behavioral aspects
associated with SMEs’ participation in public sector procurement. To take a
step in filling the gap, we used a conceptual construct known as market
orientation (MO). The construct comprises a firm’s orientation in gathering
information on competitors and customers, and using the information to
gain competitive advantage. This research found that MO has a positive
effect on how active SMEs are in searching information on available
requests for tenders and how actively they participate in bidding contests.
This work strongly suggests that MO should be taken into account when
designing procurement contracts, and MO should be fostered among SMEs.
INTRODUCTION
Despite the fact that small and medium-sized enterprises (SMEs)
play a vital role in national and regional economies, they are generally
underrepresented in public procurement markets. As a consequence,
the welfare potential of producing and delivering goods and services
through public procurement is insufficiently exploited. The
underrepresentation is undesirable since the very idea of public
---------------------
* Timo Tammi, Ph.D., is a University Lecturer at the University of Eastern
Finland Business School. His teaching and research interests are in
behavioral economics, public procurement and decision-making. Jani
Saastamoinen, Ph.D., is a Researcher at the University of Eastern Finland
Business School. His research interests are in behavioral economics,
industrial organization and public procurement. Helen Reijonen, Ph.D., is a
University Lecturer and Project Manager at the University of Eastern Finland
Business School. Her research interests include strategic orientations,
public procurement and small firm and entrepreneurial marketing.
Copyright © 2014 by PrAcademics Press
MARKET ORIENTATION AND SMES’ ACTIVITY IN PUBLIC SECTOR PROCUREMENT PARTICIPATION 305
procurement has been in exploiting the benefits of unrestricted
competition between private firms when a public sector organization
purchases goods, services or construction projects.
The underrepresentation of SMEs in the public procurement
market has raised much discussion among the designers of public
procurement architecture – viz., authorities, specialists and lawyers
especially within the Organization for Economic Cooperation and
Development (OECD), the World Trade Organization (WTO) and the
European Union (EU) and their relevant institutions. As a matter of
fact, EU has reformulated the directives of public procurement to
better take into account SMEs’ opportunities to engage in public
procurement and tenders. The next step will be the implementation of
directives via national legislative action in each member country. The
general drift behind the reform is based on past experiences on the
performance of public procurements and on surveys on the access of
SMEs to public procurement done by the Austrian Institute for SME
Research (see KMU, 2004) and by GHK Consulting (see GHK, 2010).
In spite of documented experience and surveyed perceptions of SMEs
we still lack an adequate understanding of the underrepresentation
of SMEs and the factors that foster the SMEs’ participation on public
procurement.
Two different paths can be taken to better understand the
underrepresentation of SMEs in public procurements. One path is
related to market structure and the inability of public procurement
designs and laws to promote both the participation of SMEs and that
of larger enterprises equally. The other path leads to the abilities and
aspirations of SMEs themselves: for example, does an explicit
strategy and organized utilization of the information on one’s
business environment increase SMEs activity towards public
procurements? There is quite scant but growing literature on
procurement law and competition law in the context of public
procurement (Graells, 2011; Weishaar, 2013) whereas research on
the strategic and behavioral aspects of the participation of SMEs in
public procurements is largely absent.
The second path was taken to explore a set of factors influencing
SMEs activity to participate in public procurements. The authors
focused on the influence of a definite strategic construct known as
market orientation, which has been studied extensively in marketing
and business economics literature since the 1990s (Kohli & Jaworski,
To continue reading
Request your trial