work is licensed under a Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/ licenses/by-nc-nd/3.0/igo/legalcode) and may be reproduced with attribution to the IDB and for any noncommercial purpose. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Note that link provided above includes additional terms and conditions of the license.The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.http://www.iadb.org 2016 ABSTRACT * Public procurement accounts for a significant proportion of overall demand for goods and services. Thus, it could be a useful tool for fostering innovation and economic growth. While interest in the use of public procurement as industrial policy is not new, its potential to spur demand for innovative products and services, create incentives for business innovation, and accelerate the diffusion of new technologies has received much policy attention in recent years. The aim of this study is to advance knowledge on the role of public procurement as a demand-side policy instrument in stimulating firm innovation in Latin American and Caribbean (LAC) countries. In LAC countries, public procurement systems account for 20 percent of GDP, which suggests a considerable untapped potential to use public procurement for innovation (PPI) to strengthen their economic position and improve public service provision. The report first reviews the evidence on the implementation and impact of instruments and structures introduced to support PPI in selected developed countries (the United States, the European Union, Estonia, Netherlands, Spain, the United Kingdom, China, and the supranational case of EU procurement policy), identifying useful policy lessons for LAC countries. It then focuses on emerging innovation friendly procurement practices introduced in three selected LAC countries: Brazil, Chile, and Colombia. These countries offer a diverse picture in terms of the institutional path they have followed for the development of public policy for innovation/pre-commercial procurement (PPI-PCP) policies as well as important differences in the level of development of their innovation systems.JEL codes: O25, O38 Keywords: demand side innovation policy, innovation, Latin America and Caribbean countries, public policy, public procurement * The authors wish to thank the experts interviewed in the countries studied, who provided valuable insights on the issues discussed in this report. Without their assistance, this report could not have b...