The Moderating Role of Trustworthiness in the Relationship between Institutional Distance and Private Ownerships in PPPs: Evidence from Emerging Markets and Developing Countries
Publication: Construction Research Congress 2022
ABSTRACT
Scholars have long acknowledged the impact of institutional distance on the level of control in the governance structure of PPPs, but there still have ambiguity in their driving mechanisms, leading to contradictory results. Through 10,945 decisions of the level of control by private sponsors in governance structures from 120 countries between 1996 and 2019, we explore the effects of formal and informal distance as well as the moderating roles of the host country’s formal institution and home country’s informal institution to the level of control by private sponsors. Our findings denote that the higher formal distance encourages the private sponsors to choose a higher level of control so as to except their competitive advantages to the new markets, while the informal distance has an inverted U-shaped relationship with the vertex at 11.5 for the “optimal distance” for maximizing control. Besides, the formal institution of host countries intensifies the impact of formal distance. This study enriched PPP literature with diverse mechanisms beyond the formal and informal distance and addressed their boundary conditions in formal institutions of host countries.
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