The use of demand from the public sector to trigger private sector innovation is becoming increasingly important and relevant to innovation policy and as a means to support SME innovations (Geroski, 1990; Aho et al., 2006; Edler and Georghiou, 2007; Uyarra et al., 2014). It has also been acknowledged that suppliers’ inter-organizational networks may be necessary to facilitate innovations in the context of public procurement (van Meerveld et al., 2015). This paper investigates how these inter-organizational networks and the public sector customer’s demand for innovations are associated with SMEs’ innovative performance. To our knowledge, this remains an unexplored subject in the literature. Public procurement may lead to innovation in two ways: as a byproduct of ‘regular’ public procurement, or as a desired outcome of public innovation procurement, in which the public sector places an order for a product or service which does not yet exist but can be developed (Aschhoff and Sofka, 2009; Edquist and Zabala-Iturriagagoitia, 2012). The latter, in particular, has been argued to be an efficient innovation policy instrument (Lichtenberg, 1988; Aschhoff and Sofka, 2009). In regard to small and medium-sized enterprises (SMEs), public procurement could be a valuable tool in promoting their innovations (Love and Roper, 2015). Conversely, SMEs could improve the innovation potential of public procurement (Georghiou et al., 2014), because small firms are often characterized as being innovative (KonstiLaakso et al., 2012). However, firms with greater resources have a better capability of bringing innovations to the market and reaping greater rewards from them (Sorescu et al., 2003). Public procurement is not different in this respect: although innovative SMEs are actively involved in public procurement (Reijonen et al., 2016), small firms lack resources to compete for public tenders (Flynn et al., 2015). Furthermore, since public procurement of innovations is often characterized by large contracts (Uyarra et al., 2014), this may impede SMEs’ capability to respond to this instrument.