Bridging the divide: what makes for successful public-private partnerships

Bertrand Quélin, Professor of Strategy and Business Policy - May 15th, 2017
Bridging the divide: what makes for successful public-private partnerships - Bertrand Quelin HEC Paris - ©Fotolia-freshidea

Successful public-private partnerships create social and economic value. As part of a Journal of Management Studies  Special Issue “Public-Private Collaboration, Hybrid Organizational Design and Social Value,” Bertrand Quélin, Ilze Kivleniece and Sergio Lazzarini investigate the mechanisms that allow for successful inter-organizational collaboration. 

Bertrand Queling ©HEC Paris

Bertrand Quélin has been professor of strategic management and industrial economics at HEC Paris since 1989. He also directs the strategic management master’s degree program. (...)

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Public and private organizations often partner, collaborating to create value for all sides. “There is no reason to think that public and private bodies would share similar objectives,” explains Bertrand Quélin. “A public body’s main aim will be to create social value, whereas a private company’s aim is normally economic sustainability and profit. However, when they understand each other well, they can work together and create both social and economic value.” To understand how companies and organizations do this, Quélin and co-authors looked at the dimensions of each organization and how they hybridize when they form a partnership. They then identified the mechanisms that result in added social and economic value.

Two forms of hybridity often present in a partnership

Initially, Quélin needed to highlight and separate the two distinct dimensions of inter-organizational hybridity. “There is hybridity in governance, and hybridity in organizational logics,” he explains. “Hybridity in governance describes how organizations set-up their collaborations and partnerships. Hybridity in logics looks at the different, and potentially divergent, institutional patterns that influence the actions of an organization.” To illustrate, Quélin shares an example wherein both forms of hybridity create a successful, value-adding partnership: “Water is often provided by a private company that gives you water on tap in your home. The primary form of governance in this scenario is the public municipality with which the private company has signed a long-term contract. Through this, the private company is obliged to supply water to a certain number of homes and may be required to ensure that poorer people also receive water.” He goes on to add: “The contract drawn up must consider the social responsibilities of the public body and allow the private company to profit, and thus will exhibit hybridity in governance.” He explains that this has been seen in Tangiers in Morocco, where the municipality has joined forces with a French company. In this case, hybridity in logics is also observed: “A large portion of the population cannot cover the full cost of water, so the public-private partnership took action to ensure water is available to all.” 

Guillemet

Partnerships that create both social and economic value have high levels of hybridity in logics and governance

Four combinations of hybridity

To devise a successful framework, Quélin and co-authors outlined four theoretically plausible combinations of hybridity. “We needed to disentangle the standard notions of hybridity in the existing literature to understand the distinction between governance and logics and how this adds value to partnerships,” says Quélin. “The results show that, when there is little hybridity in governance, we don’t see partnerships but unitary organizations. These organizations will be largely for-profit enterprises if they do not have any hybridity in logics, but if they do, they will be more aware of their corporate social responsibility and have both social and economic goals. Conversely, when hybridity in governance is high we see public-private partnerships. However, without being combined with high hybridity in logics, the partnerships will only focus on economic gains. When paired with high hybridity in logics, we often see cross-sector alliances that have emphasis on both social benefits and economic gain. So, partnerships that create both social and economic value have high levels of hybridity in logics and governance.” Quélin then asked the question, “What are the mechanisms of value creation and how can these be shared?” 

Three key mechanisms that add value 

The team narrowed the key mechanisms down to three. Quélin explains, “Firstly, there are contractual factors. Public and private partners need to discuss the obligations of both sides – and this takes time. Here, they may discuss the potential for public monitoring to supervise private activity and add clauses to the contract that allow for penalties if the private company does not deliver. Then, there are institutional factors. Institutional environments can be created that make it easy for organizations to enter into partnerships. In some countries, laws have been set up to facilitate this, and some even have specific public-private partnership units set up to educate the market and make it more likely that partnerships will be successful. Finally it comes down to capabilities. There are large international private firms that build, make drugs, offer utilities, and so on. They have the capabilities to regularly partner with government municipalities. The public sector also needs to have the capability to supervise and monitor the private companies and ensure they meet contract specifications.”

One perfect example

Quélin concludes by discussing the Bill and Melinda Gates foundation: “The foundation delivers drugs to low income countries, mainly in Africa. It needs a good relationship with the government dictating health policy, with the pharmaceutical firms supplying the drugs, and with the NGOs who are on the ground distributing them. It is a very rich organization, which enables it to have large contracts with the drug companies – it pools purchasing and acts as a strong purchasing power. Through this, it can achieve its aim: to reduce the rates of damaging diseases for public benefit. The foundation is a good example of how the mix of hybridity in governance and hybridity in logics creates social and economic value.”

Based on an interview with Bertrand V. Quélin about his paper “Public-Private Collaboration, Hybridity and Social Value: Towards New Theoretical Perspectives,” co-authored with Ilze Kivleniece and Sergio Lazzarini (Journal of Management Studies,  2017).

Practical Applications
Practical Applications

Quélin is excited that private company executives are keen to know what lies behind the success of a partnership. “Corporate social responsibility is becoming a bigger concern in corporate operations,” he notes. “Executives pay more attention to increasing their organizations’ social value as shareholders and stakeholders hold them to account. The public decision-maker also has a voice that is heard. They want to ensure that public money is well spent and debt reduced. Knowing how to create value from partnerships can help.”

Methodologie
Methodologie

Quélin, Kivleniece and Lazzarini set out to investigate what makes for a successful public-private partnership, i.e., one that creates social and economic value for everyone involved. The team focused on two forms of hybridity embedded in inter-organizational partnerships: hybridity in governance and hybridity in organizational logics. Governance covers how companies or other institutions organize their collaborations and partnerships (shareholding, contractual relationships, distribution of tasks, supervision and monitoring). Organizational logic is concerned with the different and potentially divergent institutional patterns (for-profit vs. not-for-profit, business model and profitability, payment schemes) that influence the actions of an organization. They found that both forms of hybridity occur in public-private collaborations that create social and economic value. They then outlined the theoretical mechanisms that create value in these partnerships.