Policy Recommendations For Further Support of Public Procurement of Innovation Among Municipalities in the Baltic Sea Region

Across the Baltic Sea Region (BSR), public procurement of innovation (PPI) is increasingly recognized
as a strategic instrument for modernizing public services, strengthening competitiveness.
The PPI4Cities project, coordinated by the Lithuanian Innovation Centre with partners from Latvia,
Lithuania, Estonia, Finland, Germany, and Denmark, demonstrates that while the policy frameworks
are evolving, the practical uptake of innovation procurement remains uneven and limited by
structural, institutional, and financial barriers.

Most partner countries acknowledge the transformative potential of PPI, yet implementation is
constrained by similar systemic challenges: fragmented governance, insufficient inter-institutional
coordination, low awareness, and limited financial and methodological support. Municipalities,
which play a decisive role in introducing innovative solutions, often lack dedicated funding, risk management mechanisms, and strategic incentives to engage in innovation-driven procurement.

Common obstacles are knowledge gaps, risk aversion, rigid legal interpretations, and the absence
of impact assessment systems—have collectively hindered the ability of public institutions to adopt
innovation as a regular practice rather than an exception. Despite these challenges, numerous
strengths and good practices are evident across the region. Finland’s mature policy ecosystem,
Estonia’s centralization of innovation expertise, Lithuania’s GovTech Lab, Germany’s KOINNO
competence centre, and Denmark’s CO-PI demonstrate effective approaches to building skills,
fostering collaboration, and promoting innovation partnerships. Latvia’s growing emphasis on
digital transformation and sustainability provides a foundation for more coordinated and evidence based policymaking.
These experiences underline the importance of practical tools, shared knowledge, and capacity building networks that can connect cities, ministries, and private sector innovators. A coherent regional approach is therefore essential.

By aligning strategies, harmonizing legal and financial instruments, and
promoting knowledge exchange through digital platforms like ppi4cities.eu,
bsr countries can collectively accelerate the adoption of ppi. Empowering
municipalities with accessible guidance, measurable objectives, and stable
funding will transform innovation procurement from an experimental activity
into a sustainable driver of smart, inclusive, and resilient urban development.

Full Policy Recommendations document is available at: 2025 Policy Recomendations

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