Study On Governance Mode Of PPP Projects Based On Transaction Cost Theory

PPP refers to the partnership between the public and the private,which is favored by local governments as it plays an important role in the field of infrastructure construction.The development of PPP projects in China presents the characteristics of diversified project types,diversified management models,large cooperation period,the short time and huge investment.Those characteristics determine the high level of risks in PPP projects,leading to the multiple dimensions of the perspective of project governance.The relative researches based on transaction cost theory are shown as follows:First,the paper explores the types of governance structure of PPP projects and analyzes the factors that affect the choice of governance structures.Through the literature research method,this paper proposes that the governance structure of PPP projects is between the market and the hierarchy.The collected 80 PPP cases are analyzed and tested by the combination of literature research method,correlation analysis and OLS regression statistics.The results show that the uncertainty and asset specificity will affect the choice of governance structure.As the degree of uncertainty continues to increase,the governance structure selected for PPP projects will gradually shift from the market to hierarchy governance structure.When the degree of uncertainty increases to a very high level,the equity of the public in the special purpose vehicle arises with the increase of uncertainty.The increase in the degree of asset specificity will make the governance structure deviated from the hierarchy to the market mode.When the degree of asset specificity continues to increase to a high level,the private tends to occupy absolute dominance in the special purpose vehicle.Second,significant governance mechanism indicators that impact the PPP projects'governance efficiency have been explored.This article has analyzed the contracts and related materials of the selected 80 PPP project cases based on the grounded theory.The theoretical coding of the indicator system of PPP projects' governance mechanism has been constructed,containing the contractual and relational governance mechanism.The correlative codings,which are ranked in the order of importance,contain risk sharing,participants selection,abilitybased trust,rights allocation,supervision,financing,dispute resolution,incentives and reputation mechanisms.There are corresponding open codings under each type of correlative codings.Then,the results of correlation analysis show that there are six significant governance mechanism indicators related to the degree of uncertainty,including asset ownership(F2),insurance(F7),the private selection mechanism(F9),construction general contractor selection mechanism(F10),income right pledge(F15)and arbitration(F24);four significant governance mechanism indicators related to the degree of asset specificity,containing land acquisition method(F5),force majeure response(F6),non-monetary incentives(F26)and financial strength(F31).Empirically,to a certain extent,these governance mechanism indicators can be controlled to reduce the degree of change in transaction costs caused by the uncertainty and asset specificity.Third,this paper reveal the governance mode of PPP projects based on the transaction cost theory.The transaction cost theory believes that the endogenous transaction cost is lower under a proper governance structure.Choosing an appropriate governance mechanism or governance structure can reduce transaction costs caused by the uncertainty or asset specificity,thereby improving project governance efficiency.The case study method is utilized to verify that explore the relationship between the governance structure and governance mechanism of PPP projects is weak.Therefore,the governance structure and governance mechanism are chosen as two means to improve governance efficiency.Then,this paper respectively analyzes the relationship between governance structure(governance mechanism)and transaction costs.The results show that the transaction costs of a PPP project with the hierarchy-oriented governance structure are less than those with the market-oriented governance structure in the ex-ante phase.The transaction costs of a PPP project with adopting the hierarchy-oriented governance structure are greater than those with the market-oriented governance structure in the ex-post phase.The qualitative relationship between governance mechanism and transaction costs shows different trends with different governance mechanism indicators.Moreover,this article takes non-monetary incentive mechanism as an example,and builds the measurement model of transaction costs of municipal PPP projects under the effect of non-monetary incentives(prolonged cooperation period).The model is build based on B-S real options and prospect theory models.The verification of typical PPP cases reveals that the extension of the cooperation period will reduce the growth rate of transaction costs.The growth rate of transaction costs of small investment projects is lower than that of large investment projects.Finally,the aim of governance is to control the increase of transaction costs caused by the uncertainty or asset specificity,and the appropriate governance structure or governance mechanisms will be selected as the governance means to finally achieve the optimization of transaction costs in the ex-ante or ex-post phase.This study is benefit for promoting and deepening the theoretical research on the governance mode of PPP projects.The main results have been effectively verified.It is hoped that these results will be further improved in the research,development and practice of new PPP projects in the future.