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07

Jun

2022

Private entrepreneurs can elevate public innovations – But they also need better Governments

 
 

There is no shortage of proposals to address society’s most pressing problems—poverty, health, urban infrastructure, climate change, and many others. These propositions often involve single-handed solutions involving either direct governmental action or private outsourcing of key services, with a host of hybrid arrangements in between—such as public-private partnerships or social enterprises mixing financial and social objectives.

The truth is: no single actor or organizational form can and will be able to uniquely address the severity and scale of societal problems. Granted, governments’ rigid, bureaucratic procedures limit their innovation potential and create an opportunity to attract private-led investments and capability building. Yet private players, even if socially oriented, may not reach the scale and legitimacy of governments. We constantly find innovative social entrepreneurs who fail to leverage or scale their projects due to their lack of integration with broader public policies.

While academics, consultants and policy makers try to identify the best way to handle social problems, a careful examination of what has worked and what has systematically failed throughout the world reveals that there many paths to success and many paths to failure. Instead of emphasizing single recipes for impact, our research suggests that successful transformations require a plural approach: multiple actors who can collaborate in different ways to address complex societal problems. And in every case, capable government sits at the heart of successful collaboration, providing legitimacy, coordination, and often implementation.

Exploring Routes to Success

This plural perspective emerges from a research project comparing 24 cases of public service initiatives in four areas (education, transportation, bureaucratic services, and urban infrastructure) across three large emerging countries (Brazil, India, and South Africa). To reveal conditions explaining what works and what does not work, half of our cases are considered highly successful, whereas the other half involve projects that were poorly implemented or discontinued. This research is presented in the book The Right Privatization: Why Private Firms in Public Initiatives Need Capable Governments (Cambridge University Press, 2022, written by the first author of this article).

A critical step was to define “success.” We looked for evidence that the project’s target population improved, compared to what reasonably would have been expected to happen without the initiative. For instance, in 1997 a “one-stop shop” was implemented in the city of Sao Paulo, Brazil, to help citizens obtain driver’s licenses and other official documents. The new service, labeled “Poupatempo” (in English, “save time”), was designed to reduce the time spent by citizens across a variety of bureaucratic institutions and eliminate the need for costly intermediaries. To assess the impact of the initiative, a study compared the time spent by citizens in municipalities with and without Poupatempo, before and after the implementation of the service. The study found that Poupatempo reduced the time spent on driver’s license renewals by 29%, compared to the status quo. The initiative is now being replicated in several Brazilian municipalities, in some cases with the involvement of private operators.

Having both successful and unsuccessful cases is key to our research design. Using case analysis techniques, we identify conditions that are consistently present in the successful cases and lacking in the failed ones. The following conclusions are drawn from the specific combinations of project conditions that were present or absent to different degrees in both highly successful and failed initiatives:

  • There’s no substitute for excellent government capabilities

Consistent with our previous argument that private or hybrid entrepreneurship is no substitute for capable efficient action, we find that our high-performance cases are associated with the presence of strong public leadership and execution. In other words, regardless of their adopted path, innovative projects require highly capable governments to support their journey to successful implementation.

This finding is easy to understand. In virtually all countries, governments remain legitimate players and define basic rules. Even in emerging markets that lack efficient institutions, it is possible to identify islands with strong public capabilities: units and political leaders that can synergistically collaborate with entrepreneurs and engage diverse other areas of the public sector. Conversely, private innovations may fail to generate broad impact if they are not embedded in and supported by this broader public institutional architecture.

  • Don’t overlook the internal public service ecosystem

Another path to success is when capable governments develop and implement the project with an emphasis on internal (public) effort and resources. That is, governments stimulate intensive collaboration between multiple public units and remain attentive to input from multiple stakeholders. This demands a strong capacity to coordinate and organize.

New Delhi Metro, the second metro rail project in India, is a good illustration of this path. Reflecting the use of internal collaboration, the project involved the creation of a new public organization, The Delhi Metro Rail Corporation (DMRC), co-owned by the Government of India and the Government of National Capital Territory of Delhi. Delhi Metro was also the first project designated to the Ministry of Urban Development, beyond the core activities of the Indian Railways. Moreover, regular stakeholder consultations were held; in the design phase of the project, for instance, these discussions helped improve the blueprint of the Delhi Metro. Although some collaboration with for-profit private firms did occur in this project, our research reveals that the main mechanism of the project involved concerted effort within the public bureaucracy, associated with a general predisposition and openness to get input from external actors and strong public capacity to lead and execute all required activities.

  • Governments can also orchestrate across sectoral borders

Another path to success involves greater private engagement. In this path, we regularly see the presence of multiple for-profit and nonprofit organizations collaborating with public units. An example is South Africa’s Siyakha Nentsha project (translated as “building with young people”), an education program for teenagers in South Africa’s KwaZulu-Natal province. Aimed at reducing the threat of HIV infection, the project stimulated extracurricular activities targeting young students. Assessment studies indicated that the project resulted in significant improvements in safe sexual behavior, knowledge of the involved risks, and diverse cognitive abilities. Key to the project was the presence of nonprofit organizations (such as Population Council and Isihlangu HAD) in association with the Department of Education to offer specialized education programs. A for-profit firm, AccuData, with previous experience in projects targeting local communities, helped with data and research solutions.

A Plural Approach Demands Better Public AND Better Private Involvement

If the objective is to generate long-lasting and definitive improvements to vulnerable populations, then we should invert the usual logic of action. Instead of proposing single organizational solutions to a complex problem—such as “more private entrepreneurship to supplant inefficient governments” or “more government action to regulate profit-maximizing private firms”—we should carefully identify the social problem and consider alternative paths of action that may engage public and private actors in distinct and complementary degrees.

Our plural approach implies that “many roads lead to Rome”. That is, it builds on the strengths of multiple actors, public or private, who can be combined and recombined through multiple paths of action. Regardless of the chosen path, policy makers, social entrepreneurs and private firms should strive for improvements in public capacity. Without capable government institutions and proficient public servants, it is impossible for any combination of resources and actors to have true legitimacy or lasting impact. In fact, our research supports our premise that weak government—not excessive government—is a root cause of the long list of failed or failing public initiatives around the world. A fundamental flaw that not even the most capable and innovative social entrepreneurs can overcome.

The Right Privatization by Sergio G. Lazzarini

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About the Author: Felippe de Medeiros Oliveira

Felippe de Medeiros Oliveira is an organisational and management scholar interested in institutional and social innovation. Felippe is a PhD candidate in Management at the Bayes Business School, City, University of London and associate consultant at IDIS, Institute for Development of Social Investment. His primary research interest is understanding...

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About the Author: Armen Ovanessoff

Armen has spent the past 20+ years researching, writing and speaking about global trends in economics, business, technology and society. Most recently, he has published on the advent of intelligent and immersive technologies, the future of learning, public-private partnerships and trends in globalisation. A major emphasis of his work has been to pe...

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About the Author: Leandro S. Pongeluppe

Leandro "Leo" Pongeluppe is a Ph.D. Candidate in the Strategic Management Department at Rotman School of Management - University of Toronto. Leo's primary research interests are related to stakeholder management and socioeconomic development. Particularly, Leo is interested in understanding how organizations’ design and governance affect the achi...

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About the Author: Sergio G. Lazzarini

Sergio G. Lazzarini (PhD, 2002, Washington University in St. Louis) is the Chafi Haddad Professor of Organization and Strategy at Insper Institute of Education and Research. His specialization is strategic management, with particular emphasis on how emerging market contexts affect business strategy, the dynamics of public-private interactions, and ...

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About the Author: Nobuiuki Costa Ito

Nobuiuki Costa Ito is a Professor at Ibmec São Paulo. From 2013 to 2016, he was a project coordinator of Insper-Metricis, where participated in the development of impact assessment tools and collaborated in several research projects. Before that, Nobuiuki was a research associate at the Agribusiness Intelligence Center (PENSA) at University of Sã...

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