Political opportunism and transaction costs in contractual choice of public-private partnerships

The New Public Management (NPM) has achieved many successes in public service delivery, but practitioners frequently observed failures in developing and transitional economies. For instance, China's public-private partnerships (PPP) since 2014 have failed to transfer risks to the private sector, to involve private skills and expertise, and to reduce local government's debt. This article claims that PPP failures in China are associated with the contractual type of nonconcessions and the contractual choice is influenced by both political opportunism and transaction costs. Utilizing data of PPP projects in China during 2014-2016, we find that more opportunistic bureaucrats seek to increase projects of nonconcessions, but transaction costs caused by product complexities hinder governments' reliance on nonconcessions. This research extends the core analysis of PPPs in the literature from transaction costs to political opportunism, which widely exists in developing and transitional economies. Thus, our findings partially explain the failure of their NPM practices.