Modes and survival of private participation projects in 94 emerging economies

Abstract

Many emerging economies recently have launched ambitious efforts to privatize state-owned enterprises (SOEs). However, not all privatization entails complete ownership transfer from public to private hands. In many industries, especially in infrastructure industries, privatization has often been technically labeled “private participation.” In this article, we recognize different governance modes in private participation projects (namely, internal, hybrid, and market governance). We draw on transaction cost economics to conceptualize these modes as different transactions between the state and the private entity. Using data on 2,550 private participation projects in infrastructure in 94 emerging economies, we show that firms self-select private participation modes based on institutional uncertainty and asset specificity. We also find that survival differences across modes of private participation arise as a function of countries’ institutional uncertainty and private entities’ asset specificity.