Determinants for the desirability of public-private partnership mode in infrastructure development

Abstract

Purpose

This paper studies the determinants for the desirability of the public-private partnership (PPP) mode in infrastructure development.

Design/methodology/approach

The author manually collects data on over 12,000 PPP projects in China, and regard the successful transition and abnormal termination as signals for the mode’s desirability and undesirability, respectively. Then, guided by relevant theories in the literature, the author investigates the impact of various project characteristics on the projects’ successful transition and abnormal termination.

Findings

First, execution-stage projects in industries where government support is indispensable, or where quality improvement is more important than cost reduction, face higher likelihood of abnormal termination. But such negative effects are mitigated if state-owned enterprises (SOEs) participate in the social party. Second, the structure of social party matters. The participation by private firms in the social party increases the termination likelihood, while the decentralization of the social party decreases it. Third, pre-execution projects with government payment or subsidies are more likely to enter into the execution stage.

Practical implications

Regulations on participation by SOEs in PPPs, such as policy [2023 No. 115] announced by State Council, should take industrial heterogeneity into consideration.

Originality/value

Using a large sample, the author empirically tests the seminal PPP-related theories in the literature. The author also uncovers some unique stylized facts about PPPs in China, especially the impact of SOE participation in the social party on PPP survival.

Citation

Zhou, Z. (2024), "Determinants for the desirability of public-private partnership mode in infrastructure development", China Finance Review International, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/CFRI-02-2024-0069