Business Value in Public-Private Partnerships: The Positive Impact of Trust and Task-Relevant Competencies on Business Outcomes in PPPs

ABSTRACT

Governments and businesses enter public-private partnerships (PPPs) to achieve better outcomes, but successful partnerships are not easily accomplished. Because businesses’ expectations about PPP outcomes affect how and whether they participate as partners, managing PPPs effectively requires knowing not just what governments lose or gain, but also the value businesses receive. This article demonstrates how structural, collaborative, and participant factors associated with both public and private partners affect business value in PPPs. Based on a mixed-methods approach, this study tests four hypotheses on how PPPs influence value creation for businesses. The findings show that PPP experience, trust, and size have significant effects on business value. However, they only increase certain types of value, depending on the presence and performance of other factors. Moreover, the results show that businesses gain more intangible values, such as network development and knowledge, than revenue.

Notes

Austin and Seitanidi’s evaluation framework distinguish between interaction and associational benefits as two separate categories (Austin and Seitanidi 2012b). They are operationalized into one category in this study, as they concern intangible benefits rather than revenue and innovation. High factor loadings and reliability scores support the validity and internal consistency of this categorization of survey items (see Table A1 in the Appendix). The value categories may be mutually reinforcing. For instance, socially responsible activities can influence a business’ financial performance through improved stakeholder relationships (Barnett and Solomon 2012; Austin and Seitanidi 2012b).

As a part of a larger research project, the survey was distributed to both public and private respondents (497 in total), but only business responses are used in this study.

The majority of the business respondents are small to midsized businesses (SMBs of 249 employees or less). To the knowledge and experience of the author, SMBs rather than large businesses, usually participate in innovation-oriented PPPs, which indicates some degree of survey representativeness. SMBs view this type of partnership as an opportunity to develop new products and gain access to funding and the public sector.

The results of the regression analyses do not show obvious signs of biased relationships in terms of highly inflated or deflated effects (Andersen et al. 2016). The only variable showing consistently significant effects on all three dependent variables is the registered number of PPPs the respondents have participated in, which is not likely to be affected by response bias. Moreover, the dependent variables do not indicate that the respondents overstate their reported benefits; e.g., the average transferred value is .465 on a scale from 0–3 (see Table 2).

The business respondents could choose among 13 benefits achieved by their organization in the PPI, but the item “other” was too vague to be included here, and the items “export opportunities” and “new company” are left out as they represent long-term business sustainability.

A negative binomial regression model was tested against the Poisson model with a likelihood-ratio (LR) test, showing only barely significant evidence of overdispersion (p < .05) (over predicting zero) for transferred value. As the size and direction of the estimates in the two models are very close, Poisson regression is used to predict all three variables, using robust standard errors. All regression analyses were performed in Stata 14.

It is considered somewhat risky to use maximum likelihood with samples smaller than 100, and the results should be interpreted with caution (Long and Freese 2014). The risk of uncertain estimates has been addressed by limiting the number of variables and checking the robustness of the results with OLS regression and by running the model with the original scaled variable for PPP size, which yielded similar results. Finally, the robustness was tested with additional control variables, which did not alter the results (see Table A5).

All raw interview material was organized and thematically coded in NVivo 11.

Additional information

Notes on contributors

Lena Brogaard

Lena Brogaard ([email protected]) is an assistant professor and postdoctoral researcher at the Department of Social Sciences and Business at Roskilde University, Denmark. Lena received her Ph.D. in public administration from Roskilde University. Her current research focuses on innovation, value creation, and outcome antecedents in public-private partnerships, mainly within healthcare and social services. Other research topics include free choice and the effects of contracting out.