Journal
IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT
Volume 69, Issue 5, Pages 2361-2373Publisher
IEEE-INST ELECTRICAL ELECTRONICS ENGINEERS INC
DOI: 10.1109/TEM.2020.3013381
Keywords
Investment; Developing countries; Regulation; Delays; Social sciences; Corruption; inverted U-shape; private investment; public-private partnership (PPP); red tape
Categories
Funding
- National Natural Science Foundation of China [71502028, 71971045, 71501029, 71672024]
- National Social Science Fund of China [09ZD026]
- China Postdoctoral Science Foundation [2017M610179, 2018T110228]
- China Scholarship Council [201608210170]
- Liaoning Provincial Philosophy and Social Science Planning Fund [L16AJL004]
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The government environment plays a crucial role in attracting private investment in PPP projects, particularly in developing countries. Reasonable levels of red tape enhance transparency and promote private investment, while excessive red tape poses risks for private investors. This study explores the impact of red tape on private investment in PPP projects in developing countries, and finds an inverted U-shaped relationship. Corruption weakens the positive relationship between red tape and private investment at low levels, and mitigates their negative relationship at high levels.
Government environment is the main determinant in attracting private investment into public-private partnership (PPP) projects, especially in developing countries. Red tape, an indicator of a government's efficiency, plays a critical role in private investment in PPP projects. Reasonable levels of red tape can enhance government transparency and promote private investment, while excessive red tape usually represents low governance efficiency and imposes further risk on private investors. This article explores how developing countries' red tape affects private investment in PPP projects by examining the moderating effect of corruption. Analyzing a database of 308 PPP projects in 111 developing countries, the study reveals an inverted U-shaped relationship between red tape and private investment. Corruption weakens the positive relationship between red tape and private investment at low levels of red tape and mitigates their negative relationship at high levels. The study integrates the inconsistent results of previous research that postulated either a positive or negative relationship between red tape and private investment by proposing a nonlinear model. It also theorizes the moderating effect of corruption based on real management practice and illustrates its mechanism in absorbing private investment in PPP projects.
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