Barriers and opportunities in outcome-based contracting for enabling social innovation: insights from a collaborative, public−private pilot project in Italy

Purpose Outcome-based contracts (OBCs) are gaining attention as an innovative approach potentially able to foster social innovation. By linking payments to specific social outcomes, OBCs create a dynamic and adaptive collaboration between stakeholders, aligning their efforts toward designing innovative services and achieving shared goals. However, the literature highlights that OBCs’ potential to foster social innovation is contested. This paper aims to examine the key barriers and enabling factors that shape the ability of OBCs to drive social innovation. Design/methodology/approach The authors conducted a case study research using qualitative methods, including 15 semistructured interviews with key stakeholders involved in NetImpact, an ongoing and early OBC pilot project in Italy, along with weekly meetings. The data were analyzed through thematic analysis. Findings This research suggests that cultural mindsets, institutional barriers, cross-sector frictions, performance measurement focused on procedural compliance and poor coordination between actors hinder the capacity of OBCs to support social innovation. OBCs risk being absorbed into existing procedural routines and relationships, limiting their ability to stimulate new social innovation practices or reconfigure institutional roles. Practical implications The authors suggest that policymakers and practitioners could focus not just on adopting OBCs but on concrete support: building technical and managerial capacities in public administrations, promoting shared learning platforms and strengthening inclusive governance that balances power among public, private and third sector actors. Originality/value This study argues that the true potential of OBCs to foster social innovation requires not only contractual reforms and cultural change but also capacity building and new forms of governance that prioritize ethics, learning, inclusion and long-term social value creation.