Skip to main content
Log in

Foreignness in public–private partnerships: The case of project finance investments

  • Published:
Journal of International Business Policy Aims and scope Submit manuscript

Abstract

The literature on public–private partnerships (PPPs) has begun to identify critical success factors associated with PPP performance. However, despite the international nature of PPPs, the literature has not considered the performance implications of the foreignness of the private sector firm that manages the PPP and its associated infrastructure project. This is a particularly intriguing issue for PPPs, given that the private sector firm is chosen through a bidding process by the host government to lead the project – making the relationship between foreignness and performance potentially endogenous. Our findings suggest that foreignness may have a detrimental effect on project completion time, but not the probability of project completion. Furthermore, the scale and scope of the project moderate the effect of foreignness on project performance. Our findings suggest that governments and policy makers should be mindful that the participation of foreign private sector firms has nuanced implications for local economies and stakeholders impacted by PPPs.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Subscribe and save

Springer+ Basic
EUR 32.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or Ebook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Figure 1

Similar content being viewed by others

References

  • Ashraf, N., Ahmadsimab, A., & Pinske, J. 2017. From animosity to affinity: The interplay of competing logics and interdependence in cross-sector partnerships. Journal of Management Studies, 54(6): 793–822.

    Google Scholar 

  • Babatunde, S., Opawole, A., & Akinsiku, O. 2012. Critical success factors in public–private partnership (PPP) on infrastructure delivery in Nigeria. Journal of Facilities Management, 10(3): 212–225.

    Google Scholar 

  • Bae, J., & Salomon, R. 2010. Institutional distance in international business research. In A. Gaur and V. Kumar (Eds.) The past, present and future of international business & management: 327–349. Bingley: Emerald.

    Google Scholar 

  • Bell, R., Filatotchev, I., & Rasheed, A. 2012. The liability of foreignness in capital markets: Sources and remedies. Journal of International Business Studies, 43: 107–122.

    Google Scholar 

  • Bernerth, J. B., & Aguinis, H. 2016. A critical review and best‐practice recommendations for control variable usage. Personnel Psychology, 69(1): 229–283.

    Google Scholar 

  • Bloomfield, P. 2006. The challenging business of long-term public-private partnerships: Reflections on local experience. Public Administration Review, 66(3): 400–411.

    Google Scholar 

  • Bovaird, T. 2004. Public-private partnerships: From contested concepts to prevalent practice. International Review of Administrative Sciences, 70(2): 199–215.

    Google Scholar 

  • Cabral, S. 2017. Reconciling conflicting policy objectives in public contracting: The enabling role of capabilities. Journal of Management Studies, 54(6): 823–853.

    Google Scholar 

  • Chan, A., Lam, P., Chan, D., Cheung, E., & Ke, Y. 2010. Critical success factors for PPPs in infrastructure developments: Chinese perspective. Journal of Construction Engineering and Management, 136(5): 484–494.

    Google Scholar 

  • Cheung, E., Chan, A., & Kajewski, S. 2012. Factors contributing to successful public private partnership projects: Comparing Hong Kong with Australia and the United Kingdom. Journal of Facilities Management, 10(1): 45–58.

    Google Scholar 

  • Cohen, J., Cohen, P., West, S., & Aiken, L. 2003. Applied multiple regression/correlation analysis for the behavioral sciences. Mahwah, New Jersey: Lawrence Erlbaum.

    Google Scholar 

  • Cohen, W. M., & Levinthal, D. A. 1990. Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35: 128–152.

    Google Scholar 

  • Couper, C. Reuben, A. & Prashantham, A. 2019. Lost that lovin’ feeling: The erosion of trust between small, high distance partners. Journal of International Business Studies. https://doi.org/10.1057/s41267-019-00286-w

    Article  Google Scholar 

  • Davidson, W. 1980. The location of foreign direct investment activity: Country characteristics and experience effects. Journal of International Business Studies, 11: 9–22.

    Google Scholar 

  • Davis, D., & Friske, W. 2013. The Role of Public–Private Partnerships in Facilitating Cross‐Border Logistics: A Case Study at the US/Canadian Border. Journal of Business Logistics, 34(4): 347–359.

    Google Scholar 

  • Denk, N., Kaufmann, L., & Roesch, J.-F. 2012. Liabilities of foreignness revisited: A review of contemporary studies and recommendations for future research. Journal of International Management, 18(4): 322–334.

    Google Scholar 

  • Eden, L., & Miller, S. 2001. Opening the black box: Multinationals and the costs of doing business abroad. Paper Presented at the Academy of Management Proceedings.

  • Eden, L., & Miller, S. 2004. Distance matters: Liability of foreignness, institutional distance adn ownership strategy. Advances in International Management, 16(4): 187–221.

    Google Scholar 

  • Edman, J. 2016. Reconciling the advantages and liabilities of foreignness: Towards and identity-based framework. Jounal of International Business Studies, 47(6): 674–694.

    Google Scholar 

  • Elburz, Z., Nijkamp, P., & Pels, E. 2017. Public infrastructure and regional growth: Lessons from meta-analysis. Journal of Transport Geography, 58: 1–8.

    Google Scholar 

  • Emden, Z., Yaprak, A., & Cavusgil, S. T. 2005. Learning from experience in international alliances: antecedents and firm performance implications. Journal of Business Research, 58(7): 883–892.

    Google Scholar 

  • Esty, B. 2002. Returns on project-financed investments: Evolution and managerial implications. Journal of Applied Corporate Finance, 15(1): 71–86.

    Google Scholar 

  • Finnerty, J. D. 2013. Project financing: Asset-based financial engineering. New York: Wiley.

    Google Scholar 

  • Flyvbjerg, B., Bruzelius, N., & Rothengatter, W. 2003. Megaprojects and risk: An anatomy of Ambition. Port Chester: Cambridge University Press.

    Google Scholar 

  • Forrer, J., Kee, J., Newcomer, K., & Boyer, E. 2010. Public-private partnerships and the public accountability question. Public Administration Review, 70(3): 475–484.

    Google Scholar 

  • Gereffi, G. 2019. Global value chains and international development policy: Bringing firms, networks and policy-engaged scholarship back in. Journal of International Business Policy, 3: 1–16.

    Google Scholar 

  • Grimsey, D., & Lewis, M. 2002. Evaluating the risks of public private partnerships for infrastructure projects. International Journal of Project Management, 20(2): 107–118.

    Google Scholar 

  • Hamilton, B., & Nickerson, J. 2003. Correcting for endogeneity in strategic management research. Strategic Organization, 1(1): 51–78.

    Google Scholar 

  • Henderson, J., & McGloin, E. 2004. North/South infrastructure development via cross-border PPP mechanisms. International Journal of Public Sector Management, 17(5): 389–413.

    Google Scholar 

  • Hitt, M. A., Lee, H.-U., & Yucel, E. 2002. The importance of social capital to the management of multinational enterprises: Relational networks among Asian and Western firms. Asia Pacific Journal of Management, 19(2-3): 353–372.

    Google Scholar 

  • Holburn, G., & Zelner, B. 2010. Political capabilities, policy risk, and international investment strategy: Evidence from the global electric power generation industry. Strategic Management Journal, 31(12): 1290–1315.

    Google Scholar 

  • Huang, Y., & Tang, H. 2018. Are foreign firms favored in China? Firm-level evidence on the collection of value-added taxes. Journal of International Business Policy, 1(1-2): 71–91.

    Google Scholar 

  • Hymer, S. 1960. On multinational corporations and foreign direct investment, The theory of transnational corporations. London: Routledges.

    Google Scholar 

  • Jensen, M., & Meckling, W. 1976. Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4): 305–360.

    Google Scholar 

  • Ke, Y., Wang, S., Chan, A., & Cheung, E. 2009. Research trend of public-private partnership in construction journals. Journal of Construction Engineering and Management, 135(10): 1076–1086.

    Google Scholar 

  • Kolk, A., Van Tulder, R., & Kostwinder, E. 2008. Business and partnerships for development. European Management Journal, 26(4): 262–273.

    Google Scholar 

  • Kostova, T., & Roth, K. 2003. Social capital in multinational corporations and a micro-macro model of its formation. Academy of Management Review, 28(2): 297–317.

    Google Scholar 

  • Kostova, T., Beugelsdijk, S., Scott, R., Kunst, V., Chua, C. & Van Essen, M. 2019. The construct of institutional distance through the lens of different institutional perspectives: Review, analysis and recommendations. Journal of International Business Studies. https://doi.org/10.1057/s41267-019-00294-w

    Article  Google Scholar 

  • Kwak, Y., Chih, Y., & Ibbs, C. 2009. Towards a comprehensive understanding of public private partnerships for infrastructure development. California Management Review, 51(2): 51–78.

    Google Scholar 

  • Li, B., Akintoye, A., Edwards, P., & Hardcastle, C. 2005. Critical success factors for PPP/PFI projects in the UK construction industry. Construction Management and Economics, 23: 459-471.

    Google Scholar 

  • Luo, Y., Shenkar, O., & Nyaw, M. 2002. Mitigating liabilities of foreignness: Defensive versus offensive approaches. Journal of International Management, 8(3): 283–300.

    Google Scholar 

  • Mahoney, J., McGahan, A., & Pitelis, C. 2009. Perspective-the interdependence of private and public interests. Organization Science, 20(6): 1034–1052.

    Google Scholar 

  • Makino, S., & Tsang, E. 2011. Historical ties and foreign direct investment: An exploratory study. Journal of International Business Studies, 42(4): 545–557.

    Google Scholar 

  • March, J. G., & Simon, H. A. 1958. Organizations.

  • Mezias, J. 2002. Identifying liabilities of foreignness and strategies to minimize their effects: The case of labor lawsuit judgements in the United States. Strategic Management Journal, 23(3): 229–244.

    Google Scholar 

  • Miller, S., & Parkhe, A. 2002. Is there a liability of foreignness in global banking? An empirical test of banks’ X-efficiency. Strategic Management Journal, 23(1): 55–75.

    Google Scholar 

  • Nachum, L. 2010. When is foreignness an asset or a liability? Explaining the performance differential between foreign and local firms. Journal of Management, 36(3): 714–739.

    Google Scholar 

  • Nahapiet, J., & Ghoshal, S. 1998. Social capital, intellectual capital, and the organizational advantage. Academy of Management Review, 23(2): 242–266.

    Google Scholar 

  • Newenham-Kahindi, A., & Stevens, C. 2018. An institutional logics approach to liability of foreignness: The case of mining MNEs in Sub-Saharan Africa. Journal of International Business Studies, 49: 881–901.

    Google Scholar 

  • North, D. 1990. Institutions, institutional change and economic performance. Cambridge: Cambridge University Press.

    Google Scholar 

  • Orr, R. J., & Scott, W. R. 2008. Institutional exceptions on global projects: a process model. Journal of International Business Studies, 39(4): 562–588.

    Google Scholar 

  • Osei-Kyei, R., & Chan, A. 2015. Review of studies on the critical success factors for public–private partnership (PPP) projects from 1990 to 2013. International Journal of Project Management, 33(6): 1335–1346.

    Google Scholar 

  • Petersen, B., & Pedersen, T. 2002. Coping with liability of foreignness: Different learning engagements of entrant firms. Journal of International Management, 8(3): 339–350.

    Google Scholar 

  • PFI. 2014. Project finance international database. London: Thomson Reuters.

    Google Scholar 

  • Poliakova, E., Riddle, L. & Cummings, M. 2019. Diaspora investment promotion via public-private partnerships: Case study insights and IB research implications from the Succeed in Ireland Initiative. Journal of International Business Policy. https://doi.org/10.1057/s42214-019-00044-7

    Article  Google Scholar 

  • Porter, M. E. 1990. The competitive advantage of nations. Harvard Business Review, 68(2): 73–93.

    Google Scholar 

  • Quelin, B., Kivieniece, I., & Lazzarini, S. 2017. Public-private collaboration, hybridity and social value: Towards new theoretical perspectives. Journal of Management Studies, 54(6): 763–792.

    Google Scholar 

  • Sawant, R. 2010. The economics of large-scale infrastructure FDI: The case of project finance. Journal of International Business Studies, 41: 1036–1055.

    Google Scholar 

  • Shaver, J. M. 1998. Accounting for endogeneity when assessing strategy performance: does entry mode choice affect FDI survival? Management Science, 44(4): 571–585.

    Google Scholar 

  • Shaver, J. M., Mitchell, W., & Yeung, B. 1997. The effect of own‐firm and other‐firm experience on foreign direct investment survival in the United States, 1987–92. Strategic Management Journal, 18(10): 811–824.

    Google Scholar 

  • Shen, J., & Reuer, J. 2005. Adverse selection in acquisitions of small manufacturing firms: A comparison of private and public targets. Small Business Economics, 24(4): 393–407.

    Google Scholar 

  • Shenkar, O., Luo, Y., & Yeheskel, O. 2008. From “distance” to “friction”: Substituting metaphors and redirecting intercultural research. Academy of Managment Review, 33(4): 905–923.

    Google Scholar 

  • Shi, W., & Hoskisson, R. 2012. Advantages of foreignness: Benefits of creative institutional deviance. Advances in International Management, 25: 99–125.

    Google Scholar 

  • Stevens, C., & Dykes, B. 2013. The home country cultural determinants of firms’ foreign market entry timing strategies. Long Range Planning, 46(4-5): 387–410.

    Google Scholar 

  • Stevens, C., & Shenkar, O. 2012. The liability of home: Institutional friction and firm disadvantage abroad. Advances in International Management, 25: 127–148.

    Google Scholar 

  • Stevens, C. E., Xie, E., & Peng, M. W. (2016). Toward a legitimacy‐based view of political risk: The case of Google and Yahoo in China. Strategic Management Journal37(5), 945–963.

    Google Scholar 

  • Tang, L., Shen, Q., & Cheng, E. 2010. A review of studies on public–private partnership projects in the construction industry. International Journal of Project Management, 28(7): 683–694.

    Google Scholar 

  • Un, C. 2011. The advantage of foreignness in innovation. Strategic Management Journal, 32(11): 1232–1242.

    Google Scholar 

  • Vaaler, P. 2008. How do MNCs vote in developing country elections? Academy of Managment Journal, 51(1): 21–43.

    Google Scholar 

  • Van Gestel, K., Voets, J., & Verhoest, K. 2012. How governance of complex PPPs affects performance. Public Administration Quarterly, 36: 140–188.

    Google Scholar 

  • Vidaver-Cohen, D., Gomez, C., & Colwell, S. 2015. Country-of-origin effects and corporate reputation in multinational firms: Exploratory research in Latin America. Corporate Reputation Review, 18(3): 131–155.

    Google Scholar 

  • Yescombe, E. R. 2002. Principles of project finance. Amsterdam: Academic.

    Google Scholar 

  • Yuan, J., Zeng, A., Skibniewski, M., & Li, Q. 2009. Selection of performance objectives and key performance indicators in public–private partnership projects to achieve value for money. Construction Management and Economics, 27(3): 253–270.

    Google Scholar 

  • Zaheer, S. 1995. Overcoming the liability of foreignness. Academy of Managment Journal, 38(2): 341–363.

    Google Scholar 

  • Zaheer, S. 2002. The liability of foreignness, redux: A commentary. Journal of International Management, 8(3): 351–358.

    Google Scholar 

  • Zaheer, S., & Mosakowski, E. 1997. The dynamics of the liability of foregnness: A global study of survival in financial services. Strategic Management Journal, 18(6): 439–463.

    Google Scholar 

  • Zhang, X. 2005. Critical success factors for public-private partnerships in infrastructure development. Journal of Construction Engineering and Management, 131(1): 3–14.

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Bernadine J. Dykes.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Accepted by Hafiz Mirza, Area Editor, 28 January 2020. This article has been with the authors for one revision.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Dykes, B.J., Stevens, C.E. & Lahiri, N. Foreignness in public–private partnerships: The case of project finance investments. J Int Bus Policy 3, 183–197 (2020). https://doi.org/10.1057/s42214-020-00051-z

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/s42214-020-00051-z

Keywords

Navigation