Public–Private Partnerships and Governance

Abstract

We examine the formation of public-private partnerships (PPPs), one of the most important organisational forms to evolve over the last few decades. Given that PPPs seem to have been incubated by the developed world (in particular the UK), with their relatively stronger governance structures, we examine if there is any fundamental reason why countries with stronger governance levels are more likely to opt for PPPs. In a bid to contextualise this issue, we begin by discussing the institutional structure of PPPs, as well as how they fare globally. We first discuss the trade-offs involved in the formation of PPPs. We then use this framework to develop a simple formal model based on risk sharing that is capable of analysing this issue. We show that PPPs are more likely to form in case governance is strong. Otherwise, PPPs are unlikely to form, and will be susceptible to contract renegotiation in case they do form.