Government ’s control rights influence investor’s escalation of commitment in PPP project: Regulating effect of other-face concern

Abstract

In public–private partnership (PPP) project, government’s control right (GCR) cannot be completely defined by contract information. Government has some advantageous information resources outside of the contract, such as status, supervision level, trust etc. These information lead investors to overestimate the GCR and aggravate the escalation of commitment (EOC), especially for investors who prefer the other-face concern. According to the degree of quantification of information owned by government in a PPP project, the study divided GCR into explicit control rights (ECR) and implicit control rights (ICR). In order to discuss the difference of actions that two types’ control right on investor’s EOC who have other-face concern. The study collected 176 valid data through scenario questionnaires and constructed the structural equation model with regulating effect. After verifying the model with AMOS. We found the ECR influence investor’s EOC significantly, while the ICR does not; the other-face concern only regulate the influence of ICR on investors’ EOC. These findings are helpful to reduce the behavioral risk of investors’ EOC in PPP project.