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-to-day practices aimed at reinforcing trust and long-term contractual obligations.