PPPs as Innovations: Insights from Diffusion Theory

Abstract

Public–private partnership (PPP) represents the cooperation between the government and the private sector for the delivery of public infrastructure and/or public utilities/services, drawing on their relative strengths, expertise and capacity of both to establish complementary relationships between them. The public and private parties function as partners throughout project development and delivery and often in operation and maintenance. PPP can be viewed as an innovation in infrastructure development/delivery. In the Indian context, PPP has witnessed tremendous growth over the last decade. This study analyses the growth of PPP in India for the period 1990–2012 using the logistic model for diffusion of innovations. The results of the study present some interesting insights on PPP in Indian infrastructure development as an innovation, indicating that the logistic model is appropriate for explaining the growth of infrastructure investment in India. The model provides a projection of the total market potential for the total infrastructure investment, as well as for the PPP investment and the latter was found to be 36.94% of the former. Interestingly, the adoption rate for PPP investment was higher than that for total investment, which indicates that PPP investment is spreading relatively faster than total investment. The study proposes that diffusion models can be used to monitor the rate of adoption and market potential of different schemes and/or programmes, for different subcategories of infrastructure development. For new schemes, the Bass (1969, Management Science, Vol. 15, No. 5, pp. 227) model may be more appropriate, as the diffusion of new schemes is determined by both early adoption/innovation and imitation, while for more established and ongoing programmes, the innovation rate is negligible so that the result is a pure imitation process, i.e. the logistic model. Another important aspect of diffusion modelling that would be useful for policymakers is to examine the factors affecting the adoption rate and the market potential.