Constructive Partnerships: When Alliances between Private Firms and Public Actors can Enable Creative Strategies

Drawing on transaction cost economics and externalities theory, we argue that private-public partnerships will be necessary when economic opportunity realization (1) calls for industry-specific competencies but entails significant positive externalities (i.e., implies specialized private actions with significant public benefits), (2) is shrouded by high uncertainty for the private actors, and (3) necessitates for private actors high governance costs for contracting, coordinating, and enforcing. Thus, specialized resources, positive externalities, uncertainty, and governance costs are all jointly implicated in our theory.