The Role of Public-Private Partnerships in Driving Innovation L OUIS WITTERS, R EVITAL MAROM, and K URT STEINERT, Alcatel-Lucent

Topics: Innovation, Public economics, Public–private partnership Pages: 33 (4486 words) Published: March 14, 2014
The Role of Public-Private Partnerships in Driving Innovation L OUIS WITTERS, R EVITAL MAROM, and K URT STEINERT, Alcatel-Lucent

The role of public-private partnerships in
national economies
The use by governments or public
authorities of private contributions
for public benefit is nearly as old as
recorded history.1 For example, in
the city-state of Athens in the 4th
century BC, prominent citizens
made major contributions in order
to stage public festivals and religious
events and to build public buildings
and monuments. Some centuries
later, when the Roman army conquered large parts of Europe and the Mediterranean region, civilians
worked hand-in-hand with the
army to exploit the new territories
and build needed infrastructure.
PPPs have a long history in the
United States of America (USA) as
well: the principle that government
and political leaders should use and
support private businesses—in order
to develop scientif ic advancement
and innovations for the benefit of the
society—was well established at the
time the country’s constitution was
written. One of the first instances of
a PPP in the New World occurred in

1742 when Benjamin Franklin established the American Philosophical Society of Philadelphia, which—
together with the Pennsylvania
House of Representatives—sponsored the founding of the University of Pennsylvania, the f irst medical
school in the British colonies. The
purpose of this collaboration was to
make advancements in agriculture,
science, and medicine available to
all citizens. Another, more recent,
renowned project that brought the
business world and government
together in the public interest was
the building of the Paris metro: the
tunnels were constructed by the city,
while the tracks, energy, signalling,
and rolling stock were provided by
the operator, a Belgian entrepreneur.
In today’s economic environment, PPPs are defined as contractual agreements between a public agency or public-sector authority
and a private-sector entity that allow
for greater private participation in
the delivery of public services, or
in developing an environment that
improves the quality of life for the
general public (Figure 1). Under such
a legal construction, the partners
share risk, reward, and responsibility for a shared investment.2 These partnerships are not simply tools for
funding projects, but they require
full commitment from all partners
for the entire undertaking.
The PPP legal construction can
cover three types of arrangements.
First, it can be used to introduce

private-sector ownership into
state-owned businesses through a
public listing or the introduction
of an equity partner. Second, it can
become a private finance initiative,
where the government takes advantage of private-sector management skills by awarding long-term franchises to a private-sector partner, which assumes the responsibility for
constructing and maintaining the
infrastructure and for providing the
public service. Third, it can cover
the selling of government services
to private-sector partners, which can
better exploit the commercial potential of public assets. In these three arrangements, the private-sector
consortium typically forms a special
company—called a ‘special purpose
vehicle’ (SPV)—to develop, build,
maintain, and operate the assets
for the contracted period. In cases
where the government has invested
in the project, it is usually—but not
always—allotted an equity share in
the SPV. Within the PPP, it is the
SPV that signs the contract with the
government and with subcontractors to build the facility and then maintain it.

Achieving urban sustainability through
public-private partnerships
History has frequently shown that
PPPs can improve urban living
through collaborations that combine
innovative efforts from the private
sector, forward-thinking policies


The term ‘public-private partnership’ (PPP)...

References: Aggarwal, M., and B. Ladda. 2010. ‘PPP in Education:
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Bhattacharya, D., and M. Rahman. 2010. ‘Delivering
Social Infrastructure Through PPP: The Role
Cellucci, T. A., ed. 2010. Innovative Public Private
Partnerships: A Pathway to Effectively Solving
Croplife International. 2009. ‘Advancing
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Crozier, J. 2010. ‘Smarter Urbanization Requires
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de Oliveira, A. 2011. ‘European Perspective on UserDriven Innovation (Living Labs)’. Presentation,
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ENVIROFI Consortium. 2011. ‘The Environmental
Observation Web and Its Service Applications
Europa. 2010. ‘Developing Public Private
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Manufacturing, Construction and Automotive
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Jazynka, S. 2007. ‘PPP ICT Case Studies’. Presentation
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