Public-Private Partnerships as an Instrument for Fostering Innovations and Overcoming Market Failures: A Critical Assessment

The article analyzes the three roles that Public-Private Partnerships (PPPs) in Russia may play: PPP as an instrument for the broader implementation of innovation; PPP as a tool for sustainable development; and PPP as a tool for overcoming market failures. The study shows that private firms’ incentives to innovate are missing in a PPP as they are not backed by effective tools. Additionally, risks to which the private sector partner is exposed in a PPP also reduce incentives to innovate. Claims in the literature that PPPs may have positive impact on sustainable development by increasing the efficiency of budgetary outlays also are unjustified as the government’ participation in PPPs leads to greater budget expenditures, which are shifted to future generations. Also, PPPs are unable to overcome market failures as markets are still underdeveloped in the Russia’s social sphere and other sectors.

Keywords: public-private partnerships, PPP, innovations, sustainable development, market failures