Factor analysis of partners' commitment to risk management in public‐private partnership projects

Abstract

PurposeThe purpose of this paper is to investigate and uncover key determinants that could explain partners' commitment to risk management in public‐private partnership projects so that partners' risk management commitment is taken into the consideration of optimal risk allocation strategies.Design/methodology/approachBased on an extensive literature review and an examination of the purchasing power parity (PPP) market, an industry‐wide questionnaire survey was conducted to collect the data for a confirmatory factor analysis. Necessary statistical tests are conducted to ensure the validity of the analysis results.FindingsThe factor analysis results show that the procedure of confirmatory factor analysis is statistically appropriate and satisfactory. As a result, partners' organizational commitment to risk management in public‐private partnerships can now be determined by a set of components, namely general attitude to a risk, perceived one's own ability to manage a risk, and the perceived reward for bearing a risk.Practical implicationsIt is recommended, based on the empirical results shown in this paper, that, in addition to partners' risk management capability, decision‐makers, both from public and private sectors, should also seriously consider partners' risk management commitment. Both factors influence the formation of optimal risk allocation strategies, either by their individual or interacting effects. Future research may therefore explore how to form optimal risk allocation strategies by integrating organizational capability and commitment, the determinants and measurement of which have been established in this study.Originality/valueThis paper makes an original contribution to the general body of knowledge on risk allocation in large‐scale infrastructure projects in Australia adopting the procurement method of public‐private partnership. In particular, this paper has innovatively established a measurement model of organisational commitment to risk management, which is crucial to determining optimal risk allocation strategies and in turn achieving project success. The score coefficients of all obtained components can be used to construct components by linear combination so that commitment to risk management can be measured. Previous research has barely focused on this topic.