Transaction Hazards and Governance Mechanisms in Public-Private Partnerships: A Comparative Study of Two Cases

摘要

Public-private partnerships (PPPs), although widely used to build infrastructure and deliver public services around the world, have confronted transaction hazards of uncertainty, asset specificity, information asymmetry, and contract incompleteness. Drawing from contracting theories, this article takes a holistic approach to identifying eight governance mechanisms to address transaction hazards: cognition and flexibility for uncertainty, safeguards and credibility for asset specificity, transparency and competition for information asymmetry, and reputation and trust for contract incompleteness. We then conduct a comparative study of two PPP power projects, one successful in China and the other failed in India, to illustrate how governance mechanisms function to address those transaction hazards. Among eight governance mechanisms, flexibility, credibility, and competition are especially critical to determine the success or failure of PPP projects.