Managing public sector innovation for a better society: the case of public procurement of innovation

This study examines the relationship between strategic management (SM) practices and performance in public sector innovation, focusing on Public Procurement of Innovation (PPI) as a policy mechanism to address societal challenges. Analyzing data from 185 PPI projects in Italy using Structural Equation Modelling, the findings show that strategic goal setting enhances performance outcomes, including local economic growth, community benefits, innovation promotion, and intellectual capital creation. Intra-agency collaboration facilitates the use of innovation policy instruments but does not directly improve performance. In contrast, instrument utilization positively affects strategic outcomes and mediates the link between goal setting and performance. This study contributes to procurement, innovation policy, and SM literature by demonstrating how procurement can drive innovation and societal impact. It provides actionable insights for managers and policymakers to strengthen PPI effectiveness through clear goal setting, internal collaboration, and targeted policy instruments.