Governance by targets and the performance of cross-sector partnerships: Do partner diversity and partnership capabilities matter?

Abstract

Research Summary: This study examines the effectiveness of targets as a tool for the contractual governance of cross-sector partnerships. Applying a difference-indifferences methodology, we find that the use of explicit targets within performance contracts is an effective means for improving partnership outcomes, especially where partner diversity and partnership capabilities are high. Furthermore, we find evidence that target intensity is associated with stronger partnership performance. These findings suggest that contractual forms with explicit targets may be a particularly successful approach for enhancing the public value created by cross-sector partnerships. A downward turn in performance following the removal of targets lends further support to this conclusion. Managerial Summary: Cross-sector partnerships have become a vital means for creating value in pursuit of the public interest. In particular, the effective management of these partnerships is thought to hold the key to addressing the strategic and organizational challenges posed by major social and environmental issues, such as big data and climate change. In this article, we combine data on waste recycling from 2003 to 2014 with information on performance contracts between local cross-sector partnerships and higher levels of government in England to quantify the impact of governance by targets on the performance of those partnerships. The benefits of target-setting for partnership performance that we identify are even stronger when partner diversity is high and partnership capabilities are strong. We discuss the managerial and policy implications of our findings.