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How (Not) to Foster Innovations in Public Infrastructure Projects *
Author(s) -
Hoppe Eva I.,
Schmitz Patrick W.
Publication year - 2021
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/sjoe.12393
Subject(s) - delegate , government (linguistics) , public infrastructure , procurement , general partnership , public–private partnership , unobservable , business , task (project management) , economics , finance , private sector , industrial organization , public economics , public administration , marketing , economic growth , management , political science , philosophy , linguistics , law , econometrics , programming language , computer science
The government wants an infrastructure‐based public service to be provided. First, the infrastructure has to be built; subsequently, it has to be operated. Should the government bundle the building and operating tasks in a public–private partnership? Or should it choose traditional procurement (i.e., delegate the tasks to different firms)? Each task entails unobservable investments to come up with innovations. It turns out that, depending on the nature of the innovations, bundling can either stimulate or discourage investments. Moreover, we find that if renegotiation cannot be prevented, public–private partnerships might lead the government to deliberately opt for technologically inferior projects.