When performance shortfall arises, contract or trust? A multi-method study of the impact of contractual and relational governances on performance in public – private partnerships

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Abstract

This dissertation investigates how two different governances (contractual and relational) and performance affect each other in a public – private partnership (PPP). It contributes to the governance literature by providing an integrated view of the dynamic process, not only of how these two governances affect project performance, but also how project performance affects the use of the two mechanisms in a PPP.
The research studies four PPPs formed between Dutch Water Authorities (DWAs) and their contractors. In all cases two parties (DWAs and contractors) encountered a performance shortfall (i.e. actual project performance being lower than contractually required performance). When a performance shortfall occurs, business relationship is slightly changed, it deteriorates and its outcome is uncertain. Contractual and relational strategies have been used to deal with this situation.
The contractual strategy focuses on solving the performance shortfall through a formal and written contract which explicitly stipulates the responsibilities and obligations of each party, while the relational strategy focuses on solving the performance shortfall through informal relations and shared norms.
The results shows that once a performance shortfall occurs, a relational strategy is likely to help enhance the project performance and this results in a good relational outcome. In turn, enhanced project performance and a better relationship promotes the continuous use of a relational strategy. In contrast, a contractual strategy is likely to have negative impact on project performance, thus leading to a bad relational outcome. As a result, it is likely to trigger the repeated use of the contractual strategy.
Original languageEnglish
QualificationDoctor of Philosophy
Awarding Institution
  • Tilburg University
Supervisors/Advisors
  • Akkermans, Henk, Promotor
  • Vos, Bart, Promotor
  • van der Valk, Wendy, Co-promotor
Award date8 Nov 2019
Place of PublicationTilburg
Publisher
Print ISBNs978 90 5668 610 9
Publication statusPublished - 2019

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Relational governance
Public-private partnerships
Multi-method
Project performance
Governance
Contractors
Authority
Water
Obligation
Dynamic process
Integrated
Business relationships
Trigger
Responsibility

Cite this

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title = "When performance shortfall arises, contract or trust? A multi-method study of the impact of contractual and relational governances on performance in public – private partnerships",
abstract = "This dissertation investigates how two different governances (contractual and relational) and performance affect each other in a public – private partnership (PPP). It contributes to the governance literature by providing an integrated view of the dynamic process, not only of how these two governances affect project performance, but also how project performance affects the use of the two mechanisms in a PPP. The research studies four PPPs formed between Dutch Water Authorities (DWAs) and their contractors. In all cases two parties (DWAs and contractors) encountered a performance shortfall (i.e. actual project performance being lower than contractually required performance). When a performance shortfall occurs, business relationship is slightly changed, it deteriorates and its outcome is uncertain. Contractual and relational strategies have been used to deal with this situation. The contractual strategy focuses on solving the performance shortfall through a formal and written contract which explicitly stipulates the responsibilities and obligations of each party, while the relational strategy focuses on solving the performance shortfall through informal relations and shared norms. The results shows that once a performance shortfall occurs, a relational strategy is likely to help enhance the project performance and this results in a good relational outcome. In turn, enhanced project performance and a better relationship promotes the continuous use of a relational strategy. In contrast, a contractual strategy is likely to have negative impact on project performance, thus leading to a bad relational outcome. As a result, it is likely to trigger the repeated use of the contractual strategy.",
author = "F. Fang",
note = "CentER Dissertation Series Volume: 609",
year = "2019",
language = "English",
isbn = "978 90 5668 610 9",
series = "CentER Dissertation Series",
publisher = "CentER, Center for Economic Research",
school = "Tilburg University",

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AU - Fang, F.

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N2 - This dissertation investigates how two different governances (contractual and relational) and performance affect each other in a public – private partnership (PPP). It contributes to the governance literature by providing an integrated view of the dynamic process, not only of how these two governances affect project performance, but also how project performance affects the use of the two mechanisms in a PPP. The research studies four PPPs formed between Dutch Water Authorities (DWAs) and their contractors. In all cases two parties (DWAs and contractors) encountered a performance shortfall (i.e. actual project performance being lower than contractually required performance). When a performance shortfall occurs, business relationship is slightly changed, it deteriorates and its outcome is uncertain. Contractual and relational strategies have been used to deal with this situation. The contractual strategy focuses on solving the performance shortfall through a formal and written contract which explicitly stipulates the responsibilities and obligations of each party, while the relational strategy focuses on solving the performance shortfall through informal relations and shared norms. The results shows that once a performance shortfall occurs, a relational strategy is likely to help enhance the project performance and this results in a good relational outcome. In turn, enhanced project performance and a better relationship promotes the continuous use of a relational strategy. In contrast, a contractual strategy is likely to have negative impact on project performance, thus leading to a bad relational outcome. As a result, it is likely to trigger the repeated use of the contractual strategy.

AB - This dissertation investigates how two different governances (contractual and relational) and performance affect each other in a public – private partnership (PPP). It contributes to the governance literature by providing an integrated view of the dynamic process, not only of how these two governances affect project performance, but also how project performance affects the use of the two mechanisms in a PPP. The research studies four PPPs formed between Dutch Water Authorities (DWAs) and their contractors. In all cases two parties (DWAs and contractors) encountered a performance shortfall (i.e. actual project performance being lower than contractually required performance). When a performance shortfall occurs, business relationship is slightly changed, it deteriorates and its outcome is uncertain. Contractual and relational strategies have been used to deal with this situation. The contractual strategy focuses on solving the performance shortfall through a formal and written contract which explicitly stipulates the responsibilities and obligations of each party, while the relational strategy focuses on solving the performance shortfall through informal relations and shared norms. The results shows that once a performance shortfall occurs, a relational strategy is likely to help enhance the project performance and this results in a good relational outcome. In turn, enhanced project performance and a better relationship promotes the continuous use of a relational strategy. In contrast, a contractual strategy is likely to have negative impact on project performance, thus leading to a bad relational outcome. As a result, it is likely to trigger the repeated use of the contractual strategy.

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