Interplay of relational and contractual governance in public-private partnerships: The mediating role of relational norms, trust and partners' contribution

Abstract

Defining the nature of the relationship between contractual and relational governance is critical for understanding how to maintain commitment and coordination between private and public organizations in long-term partnerships. In this study, a theoretical model explains Public-Private Partnership (PPP) project performance as the result of a mediation process. Contractual and relational governance elements operate sequentially with relational elements (relational norms and trust), playing a mediating role between contractual elements, project actors' behaviour and final performance. Based on the analysis of a survey of PPP practitioners in The Netherlands, and using Consistent Partial Least Squares Modeling, the study provides empirical support for these mediating effects. The findings are aligned with the idea that both economic incentives and hierarchical relationships formalized in contract agreements require being internalized in working practices by means of informal and socially based mechanisms. The enabling and compensating mechanisms underlying the mediation role of relational governance elements are discussed. Managers can particularly find in relational norms a leverage point for designing collaborative day-today practices aimed at reinforcing trust and long-term contractual obligations.

Politics, public servants, and profits: Institutional complexity and temporary hybridization in a public infrastructure alliance project

“…Naturally, in the Lakeside Tunnel Alliance there existed also clear monetary and formalized incentives for collaboration, such as receiving bonuses if the final cost underwent the jointly set target outturn cost. Our findings indicate that these were important in the early phases of the project to initiate the alliance but they were complemented more strongly by informal trust-based mechanisms when the project progressed, which is in line with recent empirical findings about relational contracting (see, e.g., Benítez-Ávila et al, 2018).…”

Credit Default of Local Public Sectors in Chinese Government‐Pay PPP Projects: Evidence from Ecological Construction

“…Moreover, both formal and informal institutions could be interacted as the form of contractual and relational governance in PPP projects [38][39][40]. Relational governance is suggested as a compensatory part of contractual governance [41], while contractual governance may also enhance relational governance performance [42].…”

Public-Private Partnerships: Does Russian Practice Follow International Experience?

“…The requirement to assess the effectiveness of projects implemented in the form of public-private partnership, starting from the moment the PPP Law comes into force, is an essential part of the organizational scheme for reviewing and analyzing the project by authorized representatives of government bodies [9].…”

“…In other works [see 5,6,7,8,9,10] different aspects of PPP such as prices for services in PPP projects in traditional sectors, the impact of public sector reforms on PPP, budget constraints on PPPs, risk transfer and stakeholder relationships, the influence of trust and established relationships, and regulatory regulation of PPP contracts are covered. Regional-specific experiences have also been analyzed, e.g assessing the effectiveness of PPPs in the construction of toll roads in the United States, implementing an integrated urban mega-project in the city of New Songdo in South Korea, and institutional and strategic barriers to PPP in the Netherlands [see 11,12,13].…”