Trust and transaction costs in public–private partnerships—theoretical reflections and empirical findings

Abstract

IMPACT The authors explain the importance of issues of trust in terms of collaborations between the public and private sectors, for example PPPs. They show that transaction costs particularly are impacted by levels of trust—even though the public administration’s level of trust in the private sector was higher than expected. The authors also found that reservations against PPPs on the political level increased the likelihood of mismanagement (regarding contract design and implementation) and delays. Politicians need to rethink how they communicate with officials to minimize these problems. ABSTRACT The number of public–private partnerships (PPP) is on the rise. The authors analyse empirical evidence (including outcomes from interviews and a survey of civil servants in Germany), about the importance of transaction costs and trust in PPP implementation and performance. The paper makes an important contribution to the literature by reflecting on trust relations in PPPs, as well as providing empirical evidence for higher transaction costs in PPPs, compared to entirely public sector provision.