Public–private partnerships, management capacity and public service efficiency

By working with business, public organisations are assumed to benefit from: a more contestable procurement process; access to private sector entrepreneurialism and the realisation of previously untapped scale economies. Nevertheless, realisation of these benefits may be contingent upon an expansion of management capacity to cope with vastly increased transaction costs. We examine the relationship between a commitment to public-private partnerships, management capacity and the productive efficiency of a set of English local authorities. We find that only those governments with very strong management capacity are able to realise productive efficiency gains from publicprivate partnership. Theoretical and practical implications are discussed.