Examining the Effectiveness and Efficiency of Public-Private Partnerships

While public entities and private enterprises have different motives—social good and profit, respectively—society needs collaboration between the two to successfully address grand challenges facing the world. There are many examples of this, most recently in the race to develop a COVID-19 vaccine.

But are public-private partnerships as effective and efficient as they could be? New research from the University of Minnesota investigates “whether and when public-private collaboration contributes to the success of socially beneficial innovation tasks, relative not only to firms’ solo efforts but also to collaboration involving only private-sector actors.”

Gurneeta Vasudeva Singh, associate professor of Strategic Management and Entrepreneurship at the Carlson School, and co-authors’ recent paper in the Academy of Management Journal specifically studies antimicrobial drug development to understand how public-private partnerships compare to private-private efforts. Co-authors are Birgul Arslan, assistant professor at Erasmus University, and Elizabeth B. Hirsch, associate professor at the University of Minnesota College of Pharmacy.

The researchers examined the development history of 2,496 antimicrobial drugs between 1995–2019, interviewed industry experts, and reviewed partnership contracts. They evaluated both effectiveness (whether a drug development task progresses through various stages) and efficiency (the time it takes).

As a result, the researchers found that public-private partnerships and private-private partnerships are both as effective and efficient in the early drug development stages of discovery and experimentation. However, public-private partnerships are significantly less effective in the later stages of clinical trials and commercialization and for more established technologies. Public-private collaboration is also less efficient than private-private collaboration in the clinical stages of drug development. But when new technology is involved, both types of partnerships are comparably effective and efficient throughout drug development.

“Our findings challenge the optimism around public-private collaboration for addressing societal grand challenges,” the researchers wrote, attributing the gaps in effectiveness and efficiency to the varying interests and differences in governance of public and private entities.

By shedding light on this issue, the trio believe it can help companies and public entities improve the effectiveness and efficiency of their partnerships. The paper recommends that contracts with development milestones and joint patenting provisions, for example, can help reduce the collaboration problems.

“Managers can close the performance gap between public-private and private-private collaboration by instituting careful relational practices and operational processes, thereby paving a viable alternative pathway for achieving innovation breakthroughs and addressing societal grand challenges,” the researchers wrote.

While this research was based on antimicrobial drug development, it could provide useful insights for other types of public-private partnerships as well.