Managing partner opportunism in public–private partnerships: the dynamics of governance adaptation

Abstract

Controlling partner opportunism in public–private partnership (PPP) is still controversial despite its extensive adoption. We demonstrate that partner opportunism gets controlled by the extent to which deployed governance mechanisms are aligned with the governance needs of the transaction. As unique constraint, the institutional voids limit this alignment. If not aligned with governance needs, governance adaptation cycle continues, resulting in extensive or minimally acceptable partner opportunism. The organizations tolerate opportunism as long as they derive some economic value. In the context of institutional voids, the risk of exploitation of incomplete contracts is high but if governed effectively PPPs could still deliver value.