Value Creation in Public-private Innovation Partnerships: With Focus on the Achievement of Relation Rent and Innovation of Energy-efficient Solutions within the Theoretical Framework of Strategic Contracting

Camilla Grøn & Lærke Sjøbeck Svendsen

Student thesis: Master thesis


This thesis investigates the optimal contract mechanisms in Public-Private Innovation Partnerships, hereafter referred to as PPIs, within the theoretical framework of strategic contracting. The object of the thesis is to analyze how the presence of the optimal elements in a PPI contract can ensure the achievement of relational rents and ensure progress in the innovation process, essentially contributing to the development of energy-efficient solutions and thus function as a contribution to the achievement of the climate goals set out in the Danish Climate Act of 2020. It is found that PPIs contain large untapped potentials due to the heterogeneous nature of the public and private parties and their complementary resources and knowledge, but at the same time such arrangements contain a number of barriers, which can cause the PPI to fail. On the basis of Dyer & Singh’s theory on relational rent it is concluded that the parties in a PPI can achieve relational rent, when four cumulative conditions are present. Fur the purpose of this specific thesis, relational rent is considered as welfare maximization for the public party and profit generation for the private party. Further, the value of the relational rent is considered having a spillover effect for society in respect of reduction in CO2 emission. In addition, the thesis examines and concludes that the innovation process is dependent on the integration of internal and external resources, where Chesbrough’s open-innovation paradigm will contribute to the active use of the complementary resources of the public and private parties for the development of energy-efficient solutions. This thesis furthermore examines the importance of knowledge sharing and how knowledge sharing routines are optimally facilitated. Specifically it is found that a balanced use of the interaction forms cooperation and collaboration between the public and private parties secure progress during the innovation process. Thus, it is concluded that knowledge sharing is not only important in order to achieve relational rent, but is also of significant importance in order to secure progress during the innovation process and hence achieve the full potential of a PPI project. Finally, this thesis recommends two contract provisions presented as 1) a structured communication clause and 2) a reinvestment clause to be incorporated in the PPI contract. It is concluded that these clauses constitute the optimal contract mechanisms for securing the achievement of relational rent, continuous knowledge sharing, progress during the innovation process and value accumulation. Ultimately, the introduction of clause 1) and 2) in the PPI contract can contribute to the achievement of the climate goals as set out in the Danish Climate Act of 2020.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2021
Number of pages119
SupervisorsKim Østergaard