Management Control in Inter-Organizational Relationships: Lessons Learnt from Public-Private Partnerships

Abstract

Public-private partnerships (PPPs) have become increasingly common. However, reported failure rates are high, underlining the challenge to effectively govern such relationships. The purpose of this paper is to empirically investigate the management control structure for different types of PPPs by adopting a comparative case study approach. The two cases under study are partnerships between municipalities and their private partners: a long-term infrastructure project and an urban regeneration project. Given the different nature of the activities and the accompanying risks, the PPP literature suggests that the cooperation in these PPPs is organized in very different ways, namely loose versus tight. We propose (1) that outcome-based control mechanisms play an important role in managing loosely organized PPP projects and (2) that behaviour and social control mechanisms play an important role in managing tightly organized PPP projects. Although our results support these propositions, our analysis also suggests that existing frameworks for private inter-organizational relationships (IORs) are insufficient for explaining governance structures in PPPs. Given the specific nature of PPP arrangements, we identify a number of socio-political risks and related management control mechanisms not typically discussed in theories of private IORs. More specifically, we conclude that conveners and project champions play an important role as political controls in the success of PPPs.

Keywords: inter-organizational management control, public-private partnerships, socio-political risks, political controls