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Impact of Public-Private Partnership on Business Model Transformation: Value Destruction and Value Creation in Urban Sustainable Development

Published onJun 20, 2023
Impact of Public-Private Partnership on Business Model Transformation: Value Destruction and Value Creation in Urban Sustainable Development
Johanna Mattsson1, 2, *
1 School of Business, Society & Engineering, Mälardalen University; 2 School of Information & Engineering, Dalarna University
*[email protected]

Extended abstract

Both in Our Common Future (World Commission on and Development 1987) and the Sustainable Development Goals coined by the United Nations (2015), multi-stakeholder collaborations are considered a way toward a more sustainable future. In addition, business models for sustainability are considered key in moving organizations toward sustainability (Schaltegger et al. 2016). Today, there is a growing interest in both collaborations for sustainability (e.g. Gray & Purdy 2018; Lozano 2007; Pinkse & Kolk 2012) and transforming business models for sustainability (e.g. Bocken et al. 2014; Bocken & Short 2021; Ritala et al. 2018; Stubbs & Cocklin 2008). Dentoni et al. (2021) argue what differentiates a sustainable business model from a traditional business model is the reliance on cross-sector partnerships to create value (Boons & Lüdeke-Freund 2013; Stubbs & Cocklin 2008). Thus, one can conclude that the sustainable business model is also, to a high extent, a collaborative business model. Creating social-ecological value, cross-sector partnerships where businesses expand beyond their traditional scope (Köhler et al. 2019), together with the public and non-profit sectors (Rohrbeck et al. 2013; Stubbs & Cocklin 2008) are critical (Dentoni et al. 2021), especially in a complex setting such as the urban environment (Newman & Verpraet 1999). However, far from all urban collaborations succeeds in their sustainability promises. One common collaboration in urban sustainable development projects is Public-Private Partnerships (PPP). As a form of new public management, PPPs are often criticized for upholding the status quo, downplaying sustainability goals, and creating inequality (Polk 2011; Thörn & Holgersson 2016). On the other hand, from a new public governance perspective, PPPs are a necessity for moving toward innovative and more sustainable business models (Hölscher et al. 2019; Kristjansdottir & Busch 2019; Schaltegger et al. 2016). Both perspectives are true, in the sense that collaborations such as PPP are needed, however, in its current form it is not creating the sustainable value it could (and should) in urban sustainable development (Fell and Mattsson 2021). Thus, the aim of this study is to investigate the role of PPPs in the business model transformation toward sustainable value creation. Using the definition of value creation and destruction from Upward and Jones (2015), value is created when human needs are met, and value is destroyed when needs go unmet. A transition perspective is applied to structure alternative strategies in businesses (Loorbach & Wijsman 2013) and identify capacity gaps (Hölscher et al. 2019) to increase the speed and shift the direction of the transition that is imperative to sustainable urban development. That is, also to close the gap between new public management and new public governance. Guided by value creation and value destruction, this article ought to explore the questions:

How can PPP transform business models, specifically sustainable value creation in urban development?

How can PPP impact business models, specifically sustainable value destruction in urban development?


This study used a case study design, to enable an in-depth understanding of the contemporary setting (Yin 2018) of PPP and how it creates and destroys sustainable value. A multiple case study design with a transformative approach was employed for literal replication (Yin 2018). The two cases were chosen for three reasons; First, because of the author and her supervisors’ long-term engagement in the municipal housing companies, where trust between the author and participants, in many cases, already had been established. Second, the two cases are in a similar context of mid-sized cities in Sweden, both being in a phase of expansion due to large-scale industry establishment. Third, both municipalities have pledged to become Climate Neutral by 2030. Housing is considered a key to urban sustainable development (Kraatz & Thomson 2017), this study focuses on two municipal housing companies and their collaborations with the private sector. Data was collected through (1) field observations and (2) 20 semi-structured interviews with managers (e.g., CEOs, property managers, and project managers) that lasted between 40-90 minutes from the two companies and six of their partner organizations. (3) Three workshops were held with participants inside and outside the partnerships, and (4) archival data about the partnerships was retrieved from google searches and companies’ websites. The two cases were followed from April 2021-December 2022.

Preliminary results and conclusions

Understanding how value is created and destroyed by PPP in urban development projects might be a first step in understanding the gap between the new public management logic and the new public governance logic of PPP. Although the new public governance does not equal sustainability, the arguments for collaboration in sustainable urban development are many (Hölscher et al. 2019; Kristjansdottir & Busch 2019; Schaltegger et al. 2016) and collaboration such as PPP needs to contribute to sustainable value creation. Thus, to increase the speed of change needed, guided by the literature on sustainable value creation/destruction and business model transformation, we need to understand how PPPs impact value creation/destruction and how PPPs are to transform toward sustainable value creation in urban development projects. Some preliminary results are that when the public and private sector collaborates today in urban housing projects, they contribute with the value of bringing tenants of different socio-economic backgrounds together (i.e. social mixing). However, since feedback loops are slow in the sector, the results of their social mixing strategies will not be evident until years later. A second potential value created by the PPP is a long-term perspective that both can benefit the public and private sectors, citizens, and the ecology of the city. Knowledge transfer between the public and private sectors is a third value that PPP can contribute. On the other hand, PPPs can lead to value destruction and if the collaboration is not beneficial for all partners, it can lead to unsustainable results. That is both for the partner companies involved, where one gives more than they get in return, and for citizens. If the local citizens’ needs are not met in the value creation the results might lead to a deterioration of social and ecological sustainability. In addition, the PPPs focus mainly on material and energy efficiency, rather than more radical innovations and systemic changes such as circular materials and holistic value creation. Focusing on efficiency might cause problems down the line since it deteriorates the resilience of the partnerships while it also misguides the efforts toward less transformative actions. Thus, counteractions for these shortfalls need to be considered in the business models of the PPPs in order to transform them toward sustainable value creation.

This article first contributes to the knowledge of cross-sector collaborations in urban sustainable development by analyzing two cases of PPP in Sweden. Thus, the article will contribute to deepening the knowledge of how PPP can contribute to sustainable urban development. Second, the article will contribute to how collaborations and partnerships in urban sustainable development projects can transform toward sustainable business models, that is by using an inter-disciplinary approach, linking the theory of urban sustainable transformation and sustainable business models. Third, the article will contribute to developing the concept of value destruction with empirical cases in connection to a sustainable business model. For practitioners, the article will contribute to guiding managers and policymakers in how they can apply PPP in urban sustainable development projects.


Public-private partnership, Urban sustainable development, Value creation, Value destruction, Business model transformation


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