Private funding contributions for public infrastructure

Abstract

Public infrastructure development often benefits private actors in existing urban areas, yet capturing this value for funding purposes remains uncommon. It is therefore relevant to investigate how private sector funding contributions can be implemented. This article presents the results of a qualitative case study in the Brainport region, where two recent infrastructure funding agreements include significant contributions from the regional business community. Combining concepts from game theory and institutionalism, this article examines how the path-dependent practice of public funding discourages private beneficiaries from contributing collectively, while the free-rider problem discourages them individually. We apply process tracing to unravel the mechanisms by which these barriers were overcome. The case suggests that beneficiaries can rationally decide to contribute collectively, but only if this decision contributes to a goal that is highly desirable and urgent to them, and no more beneficial options are available. While the case also indicates that the free-rider problem can be overcome through normative pressure, the evidence suggests that this requires the existence of a homogeneous, tight-knit group of beneficiaries in which private funding contributions match pre-existing norms. These results help explain why few governments succeed in implementing private sector funding contributions, and provide starting points for changing this.