The Role of Information Density in Infrastructure Investment

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.