Can public‐private innovation partnerships improve public services? Evidence from a synthetic control approach

• Published date: 01 November 2022
• Author: José M. Alonso,Rhys Andrews
• Date: 01 November 2022
• DOI: http://doi.org/10.1111/puar.13514

RESEARCH ARTICLE

Can public-private innovation partnerships improve public

services? Evidence from a synthetic control approach

José M. Alonso

1,2

| Rhys Andrews

2

1

Departamento de Economía, Universidad de

Cantabria, Santander, Spain

2

Cardiff Business School, Cardiff University,

Cardiff, UK

Correspondence

José M. Alonso, Departamento de Economía,

Universidad de Cantabria, Avda de los Castros

s/n, 39005 Santander, Spain.

Email: alonsoajm@unican.es

Funding information

European Union

Abstract

Public-Private Innovation (PPI) Partnerships can generate innovative approaches

to improving public services. However, incomplete contract theories point to diffi-

culties in making public-private collaborations work effectively and efficiently.

Drawing on these theories, we analyze the transfer of the management of a chil-

dren’s social services department in a large metropolitan government in England

to an “improvement partnership”between the local government and two private

firms. Using a synthetic control method approach, we find little evidence of

improved health or educational outcomes for looked after children during the

years following the creation of the partnership. However, there appears to be an

increase in the costs of providing children’s social services, which documentary

evidence suggests may be attributable to weak contract management capacity,

difficulties embedding performance monitoring, and additional expenditures on

the partnership’s reform programme. Our findings therefore highlight that effec-

tive supervision of PPI partnerships is essential for making them a success.

Evidence for practice

•Partnerships between public and private organizations have become popular

worldwide as a way for governments to develop innovative and cost-effective

solutions to pressing public problems.

•Public-Private Innovation partnerships require careful management to be an

effective vehicle for improving public services.

•Strong contract and performance management capabilities are required to coor-

dinate the involvement of private partners in the strategic management of pub-

lic services.

INTRODUCTION

Across the globe, partnerships between public and private

organizations are regarded as a vital means for govern-

ments to develop innovative and cost-effective approaches

to delivering public services (Hodge & Greve, 2007;

Koppenjan & Enserink, 2009; Wang et al., 2018;Yang

et al., 2013). However, there is currently a paucity of evi-

dence on the performance of Public-Private Innovation

(PPI) partnerships—public-private collaborations in which

“government and business constitute mutual development

partners based on complementary skills and resources”

(Brogaard, 2021, p. 135). In particular, while scholarly effort

devoted to the use of PPI partnerships for the provision of

public services is slowly emerging (Brogaard, 2021;Evald

et al., 2014; Gallouj et al., 2013), the impact of these part-

nerships on service outcomes and costs is rarely examined.

PPI partnerships can productively combine the entre-

preneurial spirit, management expertise and financial

know-how of the private sector, with the public capabili-

ties of democratic legitimacy, political authority, and a

stable resource base (Osborne & Gaebler, 1993; Rufin &

Rivera-Santos, 2012). However, like all forms of public-

private collaborations, PPI partnerships are characterized

by incomplete contracts that require careful management

to ensure that the partnership is a success. In particular,

Received: 17 March 2021 Revised: 24 February 2022 Accepted: 11 May 2022

DOI: 10.1111/puar.13514

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribu tion and reproduction in any medium, provided the

original work is properly cited.

© 2022 The Authors. Public Administration Review published by Wiley Periodicals LLC on behalf of American Society for Public Administration.

1138 Public Admin Rev. 2022;82:1138–1153.

wileyonlinelibrary.com/journal/puar

incomplete contracts theory suggests that the introduction

of profit maximization incentives within a public service

delivery system can have a downward effect on service

quality where contract performance is difficult to measure,

monitor, and manage (Elkomy et al., 2019; Hart et al., 1997;

Jensen & Stonecash, 2005). This is more likely to be the

case for human services due to the low measurability of

outcomes and the complex contracts that are required to

achieve those outcomes (Brown & Potoski, 2005;Romzek&

Johnston, 2005). If contract performance is not managed

effectively in these circumstances, partnering with the pri-

vate sector for innovation can therefore generate increased

rather than reduced costs, especially if the organizational

risk falls largely on public partners (Barlow et al., 2013;

Edler et al., 2015).

To explore the potential for incomplete contracts to

influence the performance of PPI partnerships, we investi-

gate a highly distinctive example of a tender-driven gover-

nance innovation in England: an “improvement partnership”

with two private firms contracted to manage Sandwell met-

ropolitan children’s social services department, which was

regarded as performing poorly by government inspectors.

This partnership was the first of its kind to run a children’s

services department in the United Kingdom, and was

described at the time as “a radical course of action to accel-

erate the pace of change and boost management capacity”

(Britton, 2013). To evaluate the success of this innovative

public-private partnership, we focus on the health and edu-

cation outcomes for looked afterchildreninSandwell,and

the costs of providing services for those children. English

metropolitan governments have a statutory duty to care for

children that family courts deem to be suffering or at risk of

suffering significant harm and are responsible for ensuring:

an appropriate standard of care; proper training and support

forcarers;andthatachild’s views, and those of their family,

are taken into account (HM Government, 2018).

Given the potentially tragic (and very public) conse-

quences of child protection failures (Marinetto, 2011), UK

central government strives to closely monitor and manage

the performance of children’s social services departments

through inspections based on a combination of perfor-

mance indicators and on-site visits. For departments

receiving adverse inspection judgments, legal responsibil-

ity for service provision can potentially be outsourced to

another organization (Wilkins & Antonopoulou, 2020),

which places considerable pressure on local governments

to implement radical changes to the management and

working practices in such departments. Sandwell is one of

only two metropolitan boroughs in England to have ten-

dered the management of its children’s social services to a

PPI partnership in response to negative inspection reports.

As such, the improvement partnership is a comparatively

unique case requiring the application of a research tech-

nique that can facilitate comparisons between its service

achievements and a counterfactual.

To investigate whether the improvement partnership

generated better outcomes for Sandwell’s looked after

children, we use a synthetic control method (SCM)

approach to analyze health and education outcomes

between 2004 and 2016, and the costs of providing ser-

vices to looked after children for that period. A SCM

approach approximates treatment effects by comparing a

“treated”case with a synthetic “untreated”version of

that case based on information from counterfactual cases

(Abadie et al., 2010). We therefore compare outcomes

and costs for Sandwell with those for a synthetic version

of the borough constructed using weighted data drawn

from other similar English metropolitan boroughs. For

health outcomes, we focus on the percentage of looked

after children receiving: (i) annual health assessments;

(ii) up-to-date immunisations; and, (iii) regular dental

checks. For educational outcomes, we focus on: (i) the

percentage of school sessions looked after children mis-

sed due to absenteeism; and (ii) the percentage of care-

leavers who were in education, employment, or training.

The cost of delivering children’s social services was

gauged using expenditure figures per looked after child.

To better understand the management and performance

of the improvement partnership, we supplement our SCM

analysis of outcomes and service costs, with a range of

documentary and archival evidence, including: annual

accounts, improvement plans, inspection reports, practi-

tioner articles, and local government cabinet and commit-

tee minutes.

Based on the available data, the SCM model suggests

that the improvement partnership neither improved nor

weakened the performance of Sandwell’s children’s social

services department, but that the costs of providing ser-

vices to looked after children may have increased when

the partnership was responsible for managing the depart-

ment. The documentary evidence provides further

insights into the ways in which the challenges associated

with managing incomplete contracts may explain these

results.

LITERATURE REVIEW

Public administration scholarship dealing with the man-

agement, governance, and performance of Public-Private

Partnerships (PPPs) has grown rapidly in recent times

(Torchia et al., 2015; Wang et al., 2018; Warsen

et al., 2018). Within that literature, increasing attention is

being paid to the role that PPI partnerships can play in

addressing major public service delivery challenges, such

as improving provision for vulnerable populations, solu-

tions to rising healthcare demands, and environmentally

sustainable transportation (Gallouj et al., 2013; Lassen

et al., 2015; Smith et al., 2019). Although PPI partnerships

are expected to result in public service improvement, to

date, most studies have focused on their utility for the

development of product, process, and service innovations

(Brogaard, 2021). So far, little systematic attention has

been paid to the use of PPI partnerships for governance

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