The impact of privatization on sustainability transitions: A comparative analysis of dynamic capabilities in three water utilities

• We analyze utilities’ ability to contribute to sustainability transition processes.
• We compare three water utilities that differ in terms of their degree of privatization.
• A higher degree of privatization leads to increased dynamic sustainability.
• A higher degree of privatization leads to decreased static sustainability.
• The impact of privatization on sustainability transitions involves trade-offs.

This paper analyzes the ability of water utilities to contribute to sustainability transition processes. More specifically, we compare the capacity of utilities, embedded in purely public, mixed and largely private governance modes, to innovate. We employ dynamic capabilities as core indicators for innovativeness and therefore as major enabling factors for sustainable sector transitions. We assess the relationship between governance modes and innovation by conducting an in-depth comparative analysis of three water utilities, each within a differing governance mode along the public-to-private continuum: Zurich, Berlin and Leeds. While we find that the private and mixed governance modes have an increased degree of innovativeness, they perform lower in terms of static sustainability criteria than the public mode. We therefore conclude that the impact of privatization on sustainability transitions in the water sector involves multi-dimensional trade-offs between static and dynamic sustainability criteria.