Constructive Partnerships: When Alliances Between Private Firms and Public Actors Can Enable Creative Strategies

Drawing on transaction cost economics and theory on externalities, the authors argue that when the realization of economic opportunity: (i) calls for industry-specific competencies, but entails significant positive externalities (i.e., implies specialized private actions with significant public benefits); (ii) is shrouded by high uncertainty to the private actors; and (iii) necessitates to private actors high governance costs for contracting, coordinating, and enforcing, then private-public alliances will be necessary for realizing the economic potential. Thus, specialized resources, positive externalities, uncertainty, and governance costs are all jointly implicated in the authors' theory.