Terrorism hazard and infrastructure projects: The moderating role of home experience and institutions

Alfredo Jiménez,Nathaniel C Lupton

doi:10.1016/j.jbusres.2021.07.012

Alfredo Jiménez, Nathaniel C Lupton

Open Access

https://doi.org/10.1016/j.jbusres.2021.07.012

Copy DOI

Abstract

This paper analyzes the impact of terrorism hazard on the performance of private participation infrastructure projects. Applying transaction cost theory, we hypothesize that terrorism hazard has a negative relationship with infrastructure project completion, and that host government accountability and investor experience with terrorism hazard have opposing impacts on this relationship. Host government accountability, we argue, produces higher indirect costs of managing terrorism hazard, which reduces investor confidence, and reinforces the negative relationship between terrorism hazard and the probability of satisfactory project completion. Conversely, investor’s experience with terrorism hazard increases investor confidence and hence partially mitigates the negative consequences of terrorism hazard which hamper project completion. Hence, the impact of terrorism is weakened for projects led by firms from higher terrorism hazard countries. We find support for our hypotheses using a sample of 5,083 projects in 135 countries from 2002 to 2017.

Highlights

Acts of terrorism pose significant threats to people and their property all over the world (Czinkota, Knight, Liesch, & Steen, 2010)
Applying transaction cost theory (TCT: Henisz et al, 2010; Wil liamson, 1981), we argue that terrorism hazard is negatively associated with the performance of private participation projects because terrorism produces both direct and indirect consequences that increase the risk of cost overruns
Through an empirical study of participation infrastructure (PPI) in emerging economies, we found that terrorism hazard increases the failure rate of projects

Summary

Introduction

Acts of terrorism pose significant threats to people and their property all over the world (Czinkota, Knight, Liesch, & Steen, 2010). These acts of violence and destruction, while rare, are highly unpredictable, everpresent threats in developing and developed countries alike (Dau, Moore, & Abrahms, 2018; Henisz, Mansfield, & Glinow, 2010). Terrorism has substantially impacted both business interests and decisions in Latin America, Western Europe, the Middle East, and North Africa, especially since the 1970s (Newcomer & Adkins, 1980). Following high-profile events, like the attacks on the World Trade Center in New York, the impacts of terrorism have become an apparent fact of life in North America as well. In particular, are a major concern of the state, necessitating both private and government intervention (Lian & Haimes, 2006; Stewart, 2010)

Objectives

Methods

Results

Discussion

Conclusion