Commercial investment in public–private partnerships: the impact of contract characteristics

Abstract

This article applies a generalised linear model (GLM) to empirically examining whether competitive bidding, transaction costs, types of contract, and contract duration affect the extent of private investment in public–private partnerships (PPP) projects, using the Private Participation in Infrastructure (PPI) database on China's projects. Results show that the extent of private investment is positively associated with the presence of competitive bidding, higher asset specificity and more residual rights controlled by private investors. Although the extent of private investment is negatively associated with increasing project size, after reaching a tipping point, increasing project size would attract more private investment. Local PPP policy supports attracting private capital to invest in short-term projects. To attract private investment to PPPs, local governments around the world should build a true partnership with the private sector by introducing a competitive bidding process, restructuring state-owned enterprises (SOEs) as a mixed form, and encouraging joint ventures between private firms.