Public sector innovation is a relatively new area that the European Commission is busy exploring as a potential driver of economic growth across the European Union. Most people are familiar with the concept of private sector innovation whereby companies come up with new products, services, technologies or processes, which are expected to create an economic benefit, such as an increase in sales revenue. The already common ‘smart phone’, which acts as a telephone but also has many other functionalities (e.g. as a text messaging device or as a means to access the internet/email services), is a good example. However, the economic impact of innovation in the public sector is less immediately apparent, because this sector mainly delivers public services such as administration, healthcare, education and policing. The same goes with the impact that public sector innovation can have on the competitiveness of the private sector.

Political support for public sector innovation

The core idea of promoting public sector innovation has the backing of EU Member States, who agreed to five priorities set out in the Commission's last Annual Growth Survey. One of these is the modernisation of public administration and the reduction of red tape. In a nutshell, the overall aim is to exploit the untapped potential for innovation so as to promote growth and jobs. In that sense, it is worth pointing out that Europe’s public sector makes up a significant part of the economy, with government revenues accounting for around 44 % as a share of the EU’s GDP. The sector also accounts for around 17 % of total employment in the EU. Examples of public sector innovation might be to speed up and simplify the process for delivering construction permits or improving the public procurement process. The idea is that this would then save companies time, which they could invest in being more innovative themselves.

Collecting data

Given that public sector innovation is still a largely unexplored area, the first logical step in the process is to collect data, and work is well underway here. In 2010, the European Commission conducted a survey of 4 000 public administrations. Key sets of the results of the survey to emerge were that 71 % of respondents pointed to improved user satisfaction, 63% to more targeted services and 61 % mentioned a faster delivery of services while 54 % offered new services to more or new types of users as a result of innovation.

The latest source of data is a Eurobarometer survey entitled ‘Innovation in the public sector: its perception in and impact on business’, which was carried out from February to March 2012. The survey covered around 8 500 businesses employing one or more people in the manufacturing, retail, services and industry sectors in the EU and in some countries outside the EU.

Improvements in public services put down to innovation

From a private sector perspective, two of the most interesting findings relate to the perception of the benefits of innovation. One finding was that 7 out of 10 respondents (69 %) whose company introduced innovations attribute at least some of their company’s 2011 turnover to those innovations. Another was that the average percentage turnover attributed to recent innovations ranges from nearly 40 % in Norway to less than 12 % in Malta.

There seem to be also considerable potential benefits to be gained from public sector innovation. For example, reducing the time needed for form-filling can save businesses valuable time that they can spend on their core business activities. According to the survey, a majority of respondents who observed the introduction of measures to improve public services say that their experience of using those services has improved as a result. Another interesting finding was that nearly two-thirds (63 %) of respondents who observed a significant improvement in public services for business attribute that improvement to innovation.

High demand for public sector innovation

It is also clear from the survey that there is high demand for public sector innovation. As indicated in the survey, a large majority (87 %) of people agree (most of them strongly) that public services need to up their efforts to become more innovative in order to better match businesses’ needs. Only a fifth of respondents, for example, think that the procedures for obtaining financial support are easy to use and only a quarter feel that government programmes are well targeted at supporting innovation.

However, there are considerable variations between countries, with 90 % of people in Greece thinking that public services ought to work harder to be innovative, as opposed to just 26 % in Luxembourg who think the same thing. The survey concludes by arguing that ‘countries that are suffering most from the crisis are the ones most in need of agile public services with the capacity to boost business innovation’.

Public procurement and innovation

Governments and public authorities are also major spenders, with public procurement representing as much as 19.4 % of the EU’s GDP in 2009. Public procurement can be defined as purchases of goods, services and public works by governments and public bodies. The survey came up with some interesting findings about the state of play in this area. Strikingly, only a quarter (24 %) of public procurement interactions included the possibility of selling an innovation to the government.

One of the questions was about whether companies saw price or innovation as being more important in public tenders for goods and services. The finding that emerged was that half of all respondents consider price to be more important than innovation, twice as many as the number who emphasise innovation over price.

Public Sector Innovation Scoreboard

While the surveys to date have provided some insight into the area of public sector innovation, more needs to be done in terms of data collection. One of the big steps that the European Commission is planning is a pilot European Public Sector Innovation Scoreboard, which is due out later this year. The aim of the scoreboard will be to help EU Member States learn from each other about public sector innovation that works well, in which country and why. It will be the first time that public sector innovation has been measured across the EU.

The Eurobarometer survey concludes by suggesting that there is plenty of work still to be done: ‘The recognition of innovation being crucial is present within the private sector. But the results show that there is no strong sense among business people in many European countries that the public sector is providing the right support to enable businesses to innovate or that the public sector is sufficiently innovative itself.’