Japanese Society and Culture


water utility management, public-private partnerships, boundary of the firm, transaction costs, relation-specific investments

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Japan’s water utility management is facing severe business challenges. During these circumstances, laws and systems are being developed to restructure the waterworks industry. Water utilities, as local public corporations, need to simultaneously pursue public interest and efficiency through public-private partnerships with private operators (public-private partnerships) and wide-area partnerships with neighboring operators.

The management foundations of Japan's water utilities have weakened, because they focus only on the effectiveness of accounting cost reductions. Specifically, the emphasis has been on the effect of reducing public sector finances, such as value for money. Outsourcing has been considered only by comparing accounting costs, such as internal personnel and outsourcing costs, and not by considering concepts such as transaction costs and incentives for operators.

This study examines the historical path of Japan's water utilities and describes the need for public-private partnerships. Furthermore, we argue that the concept of transaction costs should be introduced into the consideration and design of public-private partnerships in water utility management by means of modern economic theory that can analyze the existence of incentives for outsourcing and transaction costs.

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