Liability of Foreignness in Public-Private Partnership Projects

Abstract

With an increasing number of multinational enterprises (MNEs) participating in public-private partnership (PPP) projects worldwide, the liability of foreignness in project construction and management become a manifested research topic in both academia and practice. This study aims to explore the impact of MNE participation on the survival of PPP projects. A unified theoretical framework with internal governance and external institutional environment is elaborated, and a dataset of 4,336 projects in 121 developing countries is derived from the World Bank database to empirically verify our hypotheses. The findings suggest that MNE participation has a detrimental impact on PPP project survival. Additionally, such detrimental impact is mitigated by the two dimensions (regulatory quality, and rule of law) and intensified by two other dimensions (political stability and absence of violence, and control of corruption) of the institutional conditions in the host country. This study contributes to the body of knowledge in two ways: (1) it is one of the pioneer studies that shed light on the liability of foreignness in the context of PPP projects and enhances our understanding of the MNEs’ impacts on infrastructure projects; and (2) it enriches the stream of research on project success/failure by linking MNE participation to project survival and revealing the contingencies of host country’s institutional conditions in the complex global market.