The Role of Information Density in Infrastructure Investment

27 Pages Posted: 30 Jul 2014

See all articles by Rajiv Sharma

Rajiv Sharma

Stanford University

Eric R. W. Knight

University of Sydney Business School

Date Written: January 1, 2014

Abstract

The twentieth century witnessed an extraordinary flow of institutional investment into urban infrastructure. Notwithstanding this, the demand for infrastructure projects exceeds supply of skills and capital. With this disconnect as a backdrop we develop a model of information flow to examine how financial assets are transacted over time and space. Specifically, we build on conceptualisations of ‘information content’ from Clark and O’Connor (1997) to propose a way of theorising ‘information density’. We apply this specifically to infrastructure investment and find four ways in which infrastructure investment is highly dense. This relates to asset-level definitions in infrastructure, opacity with respect to how products are securitised, high variance in investment performance, and high relational and investment expertise. We draw on a large qualitative sample of 53 in-depth interviews, which we validate with quantitative data, to support our findings.

Suggested Citation

Sharma, Rajiv and Knight, Eric R. W., The Role of Information Density in Infrastructure Investment (January 1, 2014). Available at SSRN: https://ssrn.com/abstract=2473894 or http://dx.doi.org/10.2139/ssrn.2473894

Rajiv Sharma

Stanford University ( email )

Stanford, CA 94305
United States

Eric R. W. Knight (Contact Author)

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

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