Does Partner Type Matter? Multilateral Cofinancing Arrangements and Project Performance in Development Cooperation

Effective provision of public goods constitutes a fundamental prerequisite for sustainable development. As development cooperation faces increasing scrutiny amid fiscal constraints and shifting geopolitical dynamics, understanding how it can most effectively support public goods provision has become paramount. Yet two decades after the adoption of the Paris Declaration calling for greater alignment and harmonization, the development cooperation landscape remains highly fragmented. Multilateral organizations, particularly multilateral development banks (MDBs), are uniquely positioned to align international donors in this context. They can do so through financing instruments such as cofinancing, where they jointly fund projects with third-party donors. These cofinancing arrangements typically involve multiple types of partners including other MDBs, trust funds, United Nations organizations, and bilateral development agencies. While literature theoretically assumes that cooperation improves project performance, the diverse governance structures, budget allocation mechanisms, and strategic priorities of cofinancing partners may significantly lead to adverse effects on project outcomes . Drawing on literature on group heterogeneity and strategic alliances, this paper investigates the extent to which the type of cofinancing partner affects project performance and, thus, effective public goods provision. The contribution is twofold: First, informed by existing literature, the paper develops a typology of international cofinancing partners based on two dimensions: their heterogeneity relative to the host institution and their prior collaboration experience with it. Second, utilizing project outcome ratings provided by the World Bank's Independent Evaluation Group and project-level financing data, the paper empirically tests whether the cofinancing partner type impacts project performance. Employing OLS, logit, and two-stage least squares (2SLS) regressions, the analysis examines cofinancing arrangements involving single and multiple partner types. Preliminary results indicate that partner type matters: different types of cofinancing partners significantly affect project performance, yielding to important strategic implications for future donor collaborations.