Success in outcome-based contracts: a comparative approach

Abstract Outcome-based contracts have been increasingly invoked to improve the quality of public service provision, especially in cross-sector collaborations involving public, private, and nonprofit actors. These arrangements make payments to investors, funders, and/or service providers if the agreed-upon performance metrics are met. While some of these contracts succeed, others fail to reach the desired outcomes. This study investigates the factors contributing to the success of these contracts, considering the availability of resources, the complexity of projects, and the institutional environment. The analysis was conducted using a database of contracts implemented globally and across various policy areas through the fuzzy set qualitative comparative analysis (fsQCA) technique, with a sample of 110 contracts. The results reveal different paths to success in diverse institutional environments, highlighting the importance of adequate resources, such as per capita investment and the experience of intermediaries, and the reduction of complexity, including a smaller number of investors and a smaller scale of beneficiaries. This study provides insights for researchers and managers interested in the potential of outcome-based contracts by identifying sufficient conditions for their success through a systematic and comparative approach with a diverse sample of cases.