Association for Public Policy Analysis & Management

Public-private partnerships(PPPs) projects have been increasingly used to organize the economic transaction between public and private organizations aiming at providing public service and public assets. However, there have been increasing debates on the essence of PPPs and their performance, especially when serious dilemma appears in PPPs’ application in China. On the one hand, the increasing demands of public service need more participation from private sectors in PPPs projects. On the other hand, various problems including risk sharing, trust etc. even have made lots of PPPs projects shelved. Though there is plenty of empirical research on performance of PPPs projects, contracts, institutional environment, and relationship between public and private organization, there is few of empirical research on the uses of contractual and relational governance mechanisms and their impacts on performance of PPPs projects.

Derived from transaction cost economics and institutional theories, contractual governance (contract completeness, contract flexibility and contract fulfillment), relational governance (trust, joint planning and joint problem-solving) and regulatory environment (regulatory system completeness and regulatory implementation standardization) are used to examine the effectiveness of governance mechanisms on performance of PPPs projects. In order to identify the path of the effects of regulatory environment, contractual and relational governance mechanisms on performance of PPPs projects, confirmatory theory testing approach is used to make causal statements with stronger test of the hypothesized relationships. Drawing on survey data conducted in China in 2018, a Mediation Structural Equation Model is tested to see the link between contractual governance, relational governance, regulatory environment and performance of PPPs projects.

The findings suggest that changes in contractual governance, relational governance, regulatory environment all have both direct and indirect positive effects on changes in performance of PPPs projects. It also finds that contractual and relational governance function as complements in improving governance performance of PPPs projects. Especially, relational governance has higher total effect on performance of PPPs projects than contractual and regulatory environment. The findings can provide insights on how governance mechanism affects performance of PPPs projects, and, based on the findings of this empirical evidence, practitioners can know how to increase performance of PPPs projects.