Between Commonweal and Competition: Understanding the Governance of Public-Private Partnerships
34 Pages Posted: 14 Jul 2011
Date Written: July 14, 2011
We leverage insights and theories from the extensive inter-firm (B2B) alliance literature to explore the effect of the sector of the partners on the governance of infrastructure Public-Private Partnerships (PPPs), as compared to B2B alliances. Our analysis suggests that the sector of the partners has an important impact on PPP governance, not only because it constrains the availability of some governance mechanisms but also because it makes alternative mechanisms available or relevant to the partners. Specifically, we predict that PPPs will avoid equity structures and will rely, instead, on less complete and more complex alliance contracts; a restricted scope of activities; and non-equity hostages, such as metagovernance mechanisms or stakeholder involvement. Contrasting with B2B alliances, our analysis also suggests that trust-based governance mechanisms will play a minimal role in the governance of PPPs.
Keywords: public-private partnerships, cross-sector alliances, agency theory, transaction cost economics
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