CEO Cross-Sector Work Experience and Public–Private Partnership Formation of Private Firms in China

Abstract

As the need for collaboration across multiple organizations to deal with complex social issues such as poverty, crime, and public health grows, Public–Private Partnership (PPP) is of increasing importance. However, little is known about when and why private firms engage in such partnerships. Drawing on upper-echelon theory and the information-processing perspective, we highlight the importance of institutional knowledge and information embedded in CEO cross-sector work experience. We argue that such tacit knowledge and information enables CEOs to better identify the potential risks associated with PPPs. Consequently, CEOs with cross-sector work experience tend to be more cautious in participating in such partnerships, especially in developing economies like China, where private actors face greater information incompleteness concerning post-collaboration hazards due to the government's selective disclosure. Moreover, we develop a multi-moderator framework in which regional marketization and political connection alter the main effect by serving as supplementary information channels for private actors. A panel dataset of Chinese private listed firms from 2013 to 2021 provides strong support for our hypotheses. This study contributes to our understanding of the micro-foundation of PPP formation and draws attention to CEOs’ prior career experiences in different organizational forms.

摘要

随着多组织协作在应对贫困、犯罪和公共卫生等复杂社会问题中发挥着愈来愈关键的作用，政府和社会资本合作（PPP）也变得越来越重要。然而，关于私营企业何时以及为何参与这类合作伙伴关系，我们知之甚少。基于高层梯队理论和信息处理视角，我们认为 CEO 跨制度工作经验中所蕴含的制度知识和信息至关重要，这种隐性知识和信息使 CEO 能够更好地识别 PPP 在发展中国家的潜在风险。在中国，政府对 PPP 项目所带来的机会与风险倾向于进行选择性披露，导致私营企业面临不对称的信息环境。因此，与只有私营企业工作经历的 CEO 相比，同时具有公共部门与私营企业工作经验的 CEO 在参与此类合作时往往更为谨慎。此外，我们还发现区域市场化程度和企业政治关联可以作为补充信息的渠道改变 CEO 跨制度工作经验对企业 PPP 决策的影响。本文选取 2013—2021 中国私营上市公司数据样本为我们的研究假设提供了有力支持。本研究有助于我们理解 PPP 形成的微观基础，并引发对 CEO 在不同组织形式中的职业经验的关注

Introduction

In recent decades, Public–Private Partnership (PPP) has been increasingly adopted around the world as an efficient approach for answering the increasing demands of society (Mahoney, McGahan, & Pitelis, 2009; Roehrich, Lewis, & George, 2014; Wang, Xiong, Wu, & Zhu, 2017). Governments actively invite the private sector to engage in the development, financing, and provision of public infrastructure and services, with the intention of securing public products of better quality at optimal costs and risk allocations (Kwak, Chih, & Ibbs, 2009; Quelin, Cabral, Lazzarini, & Kivleniece, 2019). Private actors also enjoy benefits when collaborating with the public partner, such as the leveraging of various public resources and enhanced organizational reputations (Kivleniece & Quelin, 2012; Mahoney et al., 2009). In contrast to the prevalence of PPPs in developed countries, there is a low adoption rate of this novel hybrid partnership in many developing economies (Otairu, Umar, Zawawi, Sodangi, & Hammad, 2014). In China, for instance, over half of PPP projects have failed to reach a deal after initiation, and among the successfully landed projects, state-owned enterprises (SOEs) largely dominate and the participation of private firms remains comparatively limited (Tan & Zhao, 2021). Although extensive research has demonstrated how PPP benefits both private and public actors in terms of economic gains and social welfare (Boyer, Van Slyke, & Rogers, 2015; Kwak et al., 2009), much less is known about the factors that may discourage private firms from participating in PPPs, especially in emerging markets (Kivleniece & Quelin, 2012; Luo & Kaul, 2018; Soomro & Zhang, 2015).

Distinct from traditional alliances in private settings, PPP is a cross-sector collaboration that involves both the private and public sector and may generate competing interests between corporate economic objectives and broader public and social welfare (Margolis & Walsh, 2003; Pache & Santos, 2013). Previous research, grounded in theoretical perspectives such as transaction cost economics (TCE), contractual theories, resource-based view, and institutional theory, has touched upon several potential drivers that may hinder the spread of PPP among private firms (Bennett & Iossa, 2006; Dixit, 2002; Hart, 2003; Kivleniece & Quelin, 2012; Williamson, 1999). The hazards in governing such partnerships have been argued to arise largely from power imbalances and information asymmetry between public and private sectors, given that public actors usually play a dual role as both direct contractual counterparts and institutional ‘rule-setter’ with superior information flow and bargaining power (Kivleniece & Quelin, 2012; North, 1990; Quelin et al., 2019). While these studies have collectively underscored the significance of information completeness and transparency in facilitating PPP formation, they have not delved deeply into how variations in the information processed by private firms, in terms of availability and content, impact their managerial decisions. Moreover, their primary focus revolves around the institutional-, organizational-, and project-level (e.g., Bennett & Iossa, 2006; Dixit, 2002; Girth, 2012, 2014), leaving a significant gap in exploring micro-level decision-making processes behind private engagement in PPPs. This micro-level is especially critical as individuals are the ones responsible for acquiring, processing, and analyzing the information, who directly face the power imbalance and ultimately make participation decisions.

To fill this gap, we combine the upper echelons theory with the information-processing perspective and underscore the ‘pivotal contribution of individual actors in the collaborative process’ (Noble & Jones, 2006: 891; Williams, 2002). Our primary focus is to understand how private actors’ strategic decisions regarding PPP engagement vary according to CEOs’ prior work experience, which is recognized as a critical venue for acquiring information related to novel strategic issues (Levitt & March, 1988; Wood & Bandura, 1989). More specifically, we present the unique information environment of PPPs in China and focus on an under-explored aspect of CEO prior career experience—cross-sector work experiences, or whether executives have experience in non-private organizations (i.e., governments, state-owned enterprises, etc.) prior to becoming a CEO in their current private sector. We argue that a CEO with abundant work experience in both private and non-private sectors is able to obtain more tacit, ‘insider’ information about the inherent pros and cons of conducting business with the government as a private organization (Kuvaas, 2002; Thomas & McDaniel, 1990). In developing countries like China, PPP remains a relatively novel and ambiguous concept, which creates an information environment characterized by a high degree of incomplete information for private actors, such that ‘outsiders’ are often left to discern the inherent risks and uncertainties on their own. Cross-sector work experience enables CEOs to be more attentive and sensitive to the underlying hazards associated with private engagement in PPPs, thus decreasing their propensity to participate in such partnerships. We further elaborate on the mechanism by introducing two moderators, CEO political connection and regional marketization. Hypotheses are tested based on a longitudinal dataset of Chinese listed private firms during 2013–2021. We also conduct a series of robustness checks to validate the novel construct of CEO cross-sector work experience.

Guided by these ideas, our study provides three main contributions to the literature. First, we extend the understanding of the phenomenon of PPP by exploring the micro-foundation of PPP formation. We uncover the practical puzzle of why the participation rate of private enterprises in PPPs remains low in some emerging economies like China. We attempt to open the ‘black box’ explaining when and why private firms participate in PPPs by analyzing the prior work experience of top managers and their decision-making processes. In comparison to prior research that primarily investigates the antecedents and outcomes of PPP at the institutional- and organizational-levels (Bennett & Iossa, 2006; Dixit, 2002; Girth, 2012, 2014; Mahoney et al., 2009), we shift our theoretical focus to individual decision-makers. We also address this puzzle by examining the unique information environment of PPPs in China, characterized by unbalanced government disclosure, in which private actors have greater access to information on the benefits of PPP than the risks. Thus, the variance in PPP formation decisions of private actors is influenced by any additional information sources.

Second, we contribute to the upper echelons literature by concentrating on a novel aspect of CEO career background in the Chinese context—CEO work experience in different organizational forms (e.g., public and private sectors). Although CEO functional background has been widely examined, research into CEO institutional background is largely neglected. This study extends our understanding of CEO institutional background and examines the organizational form as a specific institutional area. We empirically demonstrate the organizational implications of CEO cross-sector work experience, and argue that cross-sector experience provides a powerful explanation for variations in the strategic choices of CEOs, especially as relate to cross-sector collaborations, by shaping the information they both seek and notice, as well as the way they interpret and utilize the information (Hambrick & Mason, 1984).

Finally, we apply the information-processing perspective to strategic management by exploring how it interacts with a CEO's institutional background to affect the decision-making process. We challenge the conventional notion that larger quantities of available information, believed to make decision-makers over-confident and reduce their perceived risk, invariably leads to a positive relationship with strategic adoption (Daft & Weick, 1984; Dutton, 1993; van Knippenberg, Dahlander, Haas, & George, 2015). Our study takes a novel approach by not only considering the availability of information but also examining its interplay with information content—two core attributes of the information environment (Dorobantu, Henisz, & Nartey, 2024; Carroll & Deephouse, 2014; Graf-Vlachy, Oliver, Banfield, König, & Bundy, 2020). Given the imbalanced information environment of PPPs in China, we argue that additional information on the possible pitfalls of PPPs, a result of cross-sector work experience, enhances CEOs’ awareness to the inherent risks of participating in such activity, resulting in reduced strategic adoption.

Theoretical Background and Hypotheses Development

Development of PPPs: Unique Challenges in China

As initially conceived, PPP entails ‘a long-term contract between a private party and a government agency, for providing a public asset or service, in which the private party bears significant risk and management responsibility' (Independent Evaluation Group, 2015: 11). Driven by its prominence in developed countries, governments in developing countries have also embraced the PPP model as a catalyst for advancement (Klein, Mahoney, McGahan, & Pitelis, 2010; Mahoney et al., 2009; Roehrich et al., 2014; Wang et al., 2017), with China serving as a notable example. Since the introduction of PPPs in China during the nationwide transition from a centrally planned economy to a market economy in the 1980s, private capital began to play a supplementary role to government in financing infrastructure projects and relieving local fiscal pressures (Bellier, 2003). This innovative hybrid form redefines the landscape of firm-government partnerships in China. It aims to prioritize a collaborative and mutually beneficial relationship, where the government and private sector collaborate to co-finance, develop, and operate projects, sharing both risks and rewards. The number of PPP projects in China has swiftly soared at a globally unprecedented scale, especially under the incentive of infrastructure finance created by the 2014 Budget Law (Zhao, Su, & Li, 2018).

Despite the central government's high hopes of engaging private capital in public interest domains through PPP, there is little evidence suggesting its effectiveness in China, with the low participation rate of private firms a critical issue (Tan & Zhao, 2019). In contrast to PPPs in developed countries, the Chinese government collaborates not only with purely private firms but also with SOEs. In line with China's history of gradual marketization reform (Zhang & Keh, 2015), SOEs still hold absolute dominance in the PPP market both in terms of the number of partnerships and their aggregate value (Tan & Zhao, 2019). As of 2021, private firms accounted for less than 20% of the total number of PPP projects and less than 5% of the market share (see Figure 1). These numbers raise the question: why are private firms hesitant to engage in PPPs in China?

Figure 1. Private participation of PPP in China (2016–2021). Data source: BRI data⁷

Private Participation in PPP: An Information-Processing Perspective

As one of the hybrid organizational forms that crosses public and private sector boundaries (Williamson, 1999), PPP is a relatively novel concept and exhibits a set of attributes that distinguish it from traditional collaborative forms existing purely within private domains (Kivleniece & Quelin, 2012; Mahoney et al., 2009). Residing between the polar modes of public and private sectors (Williamson, 1999), PPPs have been argued to feature a public-good nature of output and involve a nonpecuniary set of goals based on policy objectives and social welfare (Margolis & Walsh, 2003), which has an inherent tension with the profit-maximizing objectives of private firms (Pache & Santos, 2013). The hybrid structure of PPPs is also unique, as public actors not only act as the direct partners of private firms, but also represent regulators and legislators with the power to alter the underlying ‘rules of the game’ and renegotiate contractual terms (Coff, 1999; Quelin et al., 2019). PPP projects are further characterized by their long-term returns, often involving complex infrastructure or service projects that span several decades or longer. The extended investment period renders them susceptible to a higher degree of administrative controls and policy changes (Tan & Zhao, 2021; Zhang, 2015).

This emerging hybrid phenomenon has sparked growing research interests across multiple perspectives. Organizational studies have made attempts to reveal the value of PPPs for private actors, primarily focusing on benefits such as leveraging public resources (Kivleniece & Quelin, 2012), expanding business scope (Peng, Lee, & Wang, 2005), enhancing organizational legitimacy (Dacin, Oliver, & Roy, 2007), and organizational survival (Baum & Oliver, 1991). However, research delving into the potential drawbacks and challenges faced by private firms when engaging in PPPs remains relatively scarce. Among the limited existing studies, transaction cost economics and incomplete contract theory have been the predominant theoretical lens, with most work dedicated to exploring uncertainty in public–private organizational collaborations and the associated exchange hazards (Quélin, Kivleniece, & Lazzarini, 2017). The extant literature posits that hazards mainly arise from contractual incompleteness, asset specificity, and management and coordination costs (Bennett & Iossa, 2006; Dixit, 2002; Hart, 2003; Williamson, 1999).

A significant volume of research has examined the factors influencing private participation in PPP, spanning from the institutional environment and government regulations to organizational attributes and project-specific factors (e.g., Al-Tabbaa, Leach, & Khan, 2019; Boyer, 2018; Quelin et al., 2019; Tan & Zhao, 2021). A common and important thread running through these research streams is a consistent emphasis on the importance of information completeness and transparency in enabling private actors to effectively engage in public collaborations (Stiglitz, 2000). Scholars have seldomly delved deeper to examine the information environment within which private actors are embedded. This is an important area on which to focus given that the information available to private actors is not homogeneous, but varies in its sources, coverage focuses, biases, and audience access (Enikolopov & Petrova, 2015; King, Pan, & Roberts, 2013).

The information-processing perspective, developed to answer the question of how organizations deal with internal complexity and environmental uncertainty through information acquisition among decision-makers (Dorobantu et al., 2024), provides a valuable tool for expanding the existing discussion to cover a more complete picture of the PPP information environment and understand how it affects private participation. Interactions between private firms and governments do not occur in an information vacuum but in an information environment that varies greatly across contexts. Although PPP was a well-established idea in developed countries, when entering the private sector in China, it was a completely unknown concept of which private partners had limited knowledge. Unlike the existing framework in developed countries that has evolved under the context of developed regulatory institutions and private economies (Kivleniece & Quelin, 2012), the scenario in emerging economies like China presents a distinctive challenge for private firms. They must grapple with a significantly greater information disadvantage compared to their public counterparts, as the government holds an absolute advantage in terms of information access and media control, making it the predominant and most reliable source of information disclosure on PPPs. Yet, at the same time, the public sector in China is highly motivated to attract private investment, as PPPs facilitate the provision of improved public services and serve to alleviate fiscal pressures.

Given the strong motivation in the public sector to attract private investment, as well as the regulatory role of the public sector, we argue that the information environment surrounding PPPs in China is distinguished by unbalanced government disclosure, in which information about the positive aspects of PPPs is readily available to private partners but the negative aspects remain largely tacit information. Existing theoretical work has emphasized the significance of both information availability (i.e., the amount of information that is accessible) and information content (i.e., the extent to which different aspects/topics of information are accessible) as two important attributes of the information environment (Carroll & Deephouse, 2014; Dorobantu et al., 2024; Graf-Vlachy et al., 2020). In situations where the media is subject to significant oversight by governmental entities that have strong incentives to promote a certain practice, there tends to be a larger amount of information disclosed about the benefits (i.e., the positive side) and a smaller amount related to the costs and risks (i.e., the negative side).

Applying this logic to the Chinese context, the Chinese government actively champions PPP as a vehicle of progress, often accentuating the positive impacts through official channels, media outlets, and other intermediaries. The China PPPs Center¹, the largest platform for PPP information in China, consistently releases reports showcasing successful instances of private sector engagement in PPP projects. These reports emphasize how PPPs offer private enterprises a unique opportunity to contribute to vital national projects by tapping into government resources, leveraging public sector expertise, and accessing funding. For example, most articles used a very positive tone and emphasized the benefits for private firms involved In PPPs:

‘In our country, [ … ] a large number of companies have an increasingly strong desire for development and prefer PPP as a new avenue for their survival and growth’ (Jia, 2015).²

‘For companies, they are facing a rare opportunity (PPP). Companies that seize this opportunity are expected to grow from a small company into a large one, undergoing transformations from business orders to economic performance to business model’ (Essence Securities, 2015).³

At the same time, there is often a shroud of opacity surrounding the less favorable aspects of PPP projects in China. As a newly introduced form of partnership in emerging markets, PPP involves a higher degree of contractual risks and environmental uncertainties to private partners than in private–private partnership hybrid forms. These are primarily caused by the accentuated power imbalance between public and private sectors, the absence of a robust legal framework and comprehensive institutional arrangements in support of PPPs, and the increased environmental uncertainties such as policy changes (Nee, 1992; Peng & Luo, 2000; Xin & Pearce, 1996). However, news articles devoted much less space in describing the risks and even when they did, the potential negative aspects of PPPs were articulated in a forward-looking style:

‘PPP is still in a developmental process, so it will go through an exploration period. Both investors and local governments will move forward through this exploration. Currently, risk prevention measures are being refined. Many financial institutions, led by the China Development Bank, have already started to introduce long-term loan products, greatly benefiting PPP project companies in terms of financing … While risks do exist, it is believed that, with continuous adjustments, the situation will further improve’ (Essence Securities, 2015).⁴

Thus, we assume that PPPs in China are characterized by an unbalanced information environment, where for private firms, the positive aspects are extensively highlighted, while the associated risks remain largely unknown or underestimated. In other words, due to government promotion and selective disclosure, this novel hybrid phenomenon in emerging markets persists as a ‘black box’ and not all private firms are well-informed of the potential risks and hazards embedded in PPPs. For instance, a significant challenge of PPP projects in China is the low ‘landing rate’; despite the initiation of over 12,000 projects since 2014, by 2017, a mere 2,000 projects had reached a deal (Tan & Zhao, 2021). The intricacies surrounding this phenomenon and its underlying causes remain relatively obscure, however, generating an information vacuum for the majority of private actors. Therefore, decisions to participate greatly depend on how private actors comprehend and interpret the intricate information environment of PPPs, which requires a comprehensive understanding of not only publicly available information but also private information channels to eliminate the information discrepancy between the stated benefits and unstated drawbacks of engaging in PPPs. In the next section, we will combine the information environment of PPPs with decision-makers (i.e., CEOs) to provide a more detailed explanation of when and why private firms do or do not participate in PPPs in China.

CEO Cross-Sector Work Experience and PPP Formation

Newell and Simon (1956) identified individual decision-makers as a key unit of information-processing analysis. Though the landscape of factors influencing private participation in PPP is remarkably diverse at the institutional-, organizational-, and project-level, as previously discussed (e.g., Al-Tabbaa et al., 2019; Boyer, 2018; Quelin et al., 2019; Tan & Zhao, 2021), an analysis of micro-management determinants is long overdue (Noble & Jones, 2006). According to the information-processing perspective, though environmental conditions may serve as stimuli for information processing, it should be underscored how information processing is predominantly shaped by the cognitive abilities of organizational members to learn, comprehend, and make decisions for the organization, which are influenced by a spectrum of factors encompassing values, beliefs, culture, and disparities in power (Argote & Miron-Spektor, 2011; Levitt & March, 1988; Wood & Bandura, 1989). Following this stream of literature, we argue that the private information sources and information analyzing processes of top managers may be important factors that affect firms’ decisions to participate in PPPs (Noble & Jones, 2006).

In the context of emerging strategic issues such as PPPs, firms usually possess limited firsthand experience, giving them a strong motivation to seek alternative sources of private information to resolve environmental uncertainties (Yue & Wang, 2023). CEO work experience is an important area through which organizational members acquire information from past events and histories (Levitt & March, 1988; Wood & Bandura, 1989). In this study, we focus primarily on the prior work experience of CEOs and examine its relationship with the information environment of PPP and firms’ PPP participation decisions, given the widely recognized importance of top executives in the organizational decision-making process (Hambrick & Mason, 1984; Le & Kroll, 2017). A large amount of literature has shown a link between CEO prior work experience and various organizational outcomes, such as strategic change (Crossland, Zyung, Hiller, & Hambrick, 2014; Zhang & Rajagopalan, 2010), policy making (Rodenbach & Brettel, 2012), innovation (Chen, 2013), diversification (Rodenbach & Brettel, 2012), internationalization (Herrmann & Datta, 2006), and corporate social responsibility (Tang, Qian, Chen, & Shen, 2015). CEOs’ prior work experiences—the roles and positions in which they worked before becoming CEOs (Wang, Holmes, Oh, & Zhu, 2016)—have provided powerful explanations for variations in their strategic choices, as those experiences shape the information they seek and notice, as well as the way they interpret and utilize that information to make decisions (Hambrick & Mason, 1984).

Within the literature, prior work experiences can be classified in two ways: by functional area and by institutional context (Smith & White, 1987). Functional background primarily focuses on the specific roles and functions one has served within an organization, highlighting a CEO's expertise, skills, and knowledge in a particular area, such as finance, marketing, or operations. Institutional background, on the other hand, emphasizes a CEO's broader experiences in various organizations and specific industries, sectors, or countries, encompassing their knowledge of different corporate cultures, regulatory environments, and stakeholder expectations (Crossland et al., 2014). Although there is abundant research focusing on executives’ functional background, little attention has been paid to CEOs’ institutional background, beyond a few international business studies that discuss CEOs’ international experiences (Herrmann & Datta, 2006; Le & Kroll, 2017; Slater & Dixon-Fowler, 2009). Institutional information can be derived not only from the countries in which a CEO has worked but also from different organizational forms. In the context of PPP, where government and private firms interact extensively, information from both the public and private sectors is vital to the decision-making process, and further exploration of CEOs’ prior work experience in different organizational forms is highly needed.

In this article, we propose prior CEO cross-sector work experience as a necessary supplement to previous studies on CEO work experience. We define prior CEO cross-sector work experiences as CEO work experiences in different organizational forms—specifically, whether CEOs have work experiences in non-private organizations (i.e., state-owned enterprise, government) prior to becoming CEO in the current private sector. CEOs acquire different types of information from their career experiences. Comparative studies of private and public sector organizations often consider these two sectors to have dissimilar levels of resources, competencies, efficiency, and routines, which shapes variance in managers’ cognition, values, skills, and knowledge base (Cacioppe & Mock, 1984; Lachman, 1985; Shleifer, 1998). As the variety of functional backgrounds provide CEOs with information according to business operations and markets, prior work experience in diverse institutional backgrounds builds a CEO's information pool relating to governments, SOEs, and their interactions with private businesses. Compared to CEOs who have only worked in private businesses, CEOs with prior experience working in both private and non-private sectors possess a deeper understanding of various forms and regulations associated with collaboration between private firms and government as well as their inherent pros and cons. This knowledge, gained from cross-sector work experience, provides them with additional insights into the intricacies of government partnerships, generating a gap of information possessed by CEOs with and without cross-sector work experience.

As discussed in an earlier section, due to selective government disclosure, PPPs in China have an unbalanced information environment and possess high levels of information incompleteness for private actors, as public disclosures tend to portray only positive images, whereas the underlying implicit risks and uncertainties remain unstated to outsiders. Drawing from an information-processing perspective, increasing the flow of information through personal experience, knowledge spillover, and boundary spanning expands managers’ knowledge of the environment and enhances their environmental awareness (Daft & Weick, 1984; Dutton, 1993). Therefore, cross-sector work experience, as an additional channel through which top managers can acquire information, expands their insider knowledge beyond the publicly known benefits of firm-government collaborations. It encompasses the less apparent risks associated with firm-government collaborations like PPPs, such as power imbalances, incomplete contracts, long-term risks, and policy uncertainties (Peng & Luo, 2000; Tan & Zhao, 2019; Xin & Pearce, 1996). During pre-study interviews, we notice that beyond PPPs, often highlighted for their novelty, there are other government projects that are more mature and have been operating for a long time. Thus, those projects usually present higher quality and less uncertainty, providing viable alternatives to the newly introduced PPP model. CEOs with cross-sector work experience possess a deeper understanding of PPPs along with various government projects. A comprehensive knowledge of the risks and drawbacks associated with PPPs as opposed to other options enables CEOs to effectively compare PPPs with alternative models and make the optimal choice. A private CEO who has spent several years working within a government department shared his firsthand experience in collaborating with the public sector:

‘Collaboration with the government is a double-edged sword. Navigating government collaborations is quite a nuanced game. While many entrepreneurs may find PPPs attractive for the chance to build political connections and score profits through transparent bidding, those with robust government ties already enjoy access to exclusive projects and lucrative opportunities. [ … ] Diving into PPPs, especially through open bidding, comes with a bunch of risks – think intense competition, dealing with fuzzy regulations, and financial ups and down. Personally, I favor exploring alternative models for government-business cooperation rather than relying solely on PPPs. This preference stems from the belief that, as an entrepreneur who has worked in government, I know that there are also some off-the-record collaboration moves, like direct talks or franchising. They give me the flexibility to handle the nitty-gritty of projects, navigate the political scene, and meet specific requirements. Look for projects with solid government backing that match up with national development goals, especially in key sectors like infrastructure and technology — these are the hot picks. These alternatives usually come with significant government investment, ensuring stability and yielding high returns, making them more appealing than certain PPPs with drawn-out return cycles and hefty company investments’.

On the contrary, we have observed that private CEOs lacking cross-sector work experience tend to exhibit more impulsive enthusiasm toward PPPs, and be less attuned to the potential drawbacks until they are actually engaged in such partnerships. For example, a private CEO from a prominent Chinese construction firm elaborated:

‘Well, at the start, we jumped into a government urban infrastructure project through competitive bidding, thinking it was a surefire way to make some good money. However, once you're committed, it's like your hands are tied when it comes to decision-making. In China's PPP scene, pressures come at you from all angles. For instance, dealing with approvals, regulations, and bureaucratic red tape can slow things down to a crawl—it's like trudging through knee-deep mud. And we don't even have the final say on pricing; we've got to strike a delicate balance between making profits and not emptying the public's pockets. Plus, the rules of the game can change overnight—incentives, funding, and sometimes, they just pull the plug on the whole thing. It's a real tightrope act’.

Based on the aforementioned facts, we argue that within the unbalanced information environment of PPPs in China, cross-sector work experience serves as an additional channel for acquiring private information and significantly increases executives’ knowledge of the negative aspects of private engagement in PPPs (Peng & Luo, 2000; Tan & Zhao, 2019; Xin & Pearce, 1996). Compared to the positive sides that are widely disclosed and CEOs without related experience could also easily acquire, the negative side of PPPs are more accessible and more salient only to CEOs with cross-sector work experience.

Moreover, cross-sector work experience not only enhances CEOs’ awareness of the negative aspects of PPPs but also heightens their sensitivity to them. Based on the bounded rationality assumption that individuals are limited in their capacity to process information (Simon, 1955), scholars have shown that additional accessibility of information has a seductive or distracting effect that ‘leads managers to focus more on those decision-making components addressed by the information’ (Glazer, Steckel, & Winer, 1992: 213). In other words, when individuals are equipped with private knowledge not shared with others, managerial interpretation and decision-making will largely be in the direction of the unique information they possess (Glazer et al., 1992). Applying this logic, we argue that compared to their counterparts, CEOs with cross-sector work experience are more likely to anchor their strategic decisions around the insider information pertaining to the risks and uncertainties involved in public–private relationships that only they possess. In sum, access to such additional information not only heightens their awareness but also drives their focus on the negative sides of engaging in PPP as a private actor (Kuvaas, 2002). Therefore, CEOs with cross-sector work experience tend to assess PPP participation more vigilantly than those without such experience, leading to a reduced likelihood of participation.

Hypothesis 1 (H1): CEO cross-sector work experience is negatively related to private participation in public–private partnerships.

Moderating Effects: Political Connection and Regional Marketization

Prior work experience is not the only source through which individuals acquire information that affects their decision-making. Based on the organizational information-processing perspective, there are two common sources of information: (1) internal source that is unique to the firm, such as personal experiences and inter-person relationships; (2) external sources that constitute public information, such as environmental signals (Bourgeois, 1985; Huber, 1991; Yue & Wang, 2023). Drawing on this insight, we propose two moderators, political connection and regional marketization, to capture the internal and external information channel, respectively. We anticipate that in addition to cross-sector work experience serving as an internal channel for acquiring private information, these two information sources play different roles in shaping the ‘balance’ of information environment of PPPs in China: CEO's political connections contribute additional private knowledge about the negative sides of PPPs, thus resulting in a wider gap of information between those with insider knowledge and those without. This, in turn, strengthens the inhibiting effect of cross-sector work experience. Conversely, regional marketization is expected to increase the publicity of negative sides of PPPs, thereby narrowing the gap of information possessed by insiders and outsiders. Consequently, this attenuates the effects of cross-sector work experience.

Political connection

CEO cross-sector work experience does not serve as the exclusive internal source of related institutional knowledge and information informing PPP decision-making. Another common yet important internal source of such information, often concealed from the public eye, is through political connections, which is particularly salient within the Chinese context (Chen, Chen, & Huang, 2015; Li & Zhang, 2007).

It is commonly acknowledged that political connections can expedite access to valuable non-market resources and information that are not publicly available (Hillman, 2005; Tihanyi et al., 2019). Goldman, Rocholl, and So (2009: 2332) posited that managerial political connections can bring benefits to firms by ‘providing knowledge about how to navigate government bureaucracies’. As a conduit for private information, political connections allow firms to navigate political markets, granting them an edge in gaining institutional knowledge to better understand unpredictable policies and regulations (Hillman & Hitt, 1999).

In the unbalanced information environment of PPPs in China, where the negative sides of PPPs are more difficult to capture and understand than the positive sides, CEO political connections could enrich private actor's insider information about the government in a similar way as CEO cross-sector work experience does. This additional information adds on CEO cross-sector work experience by further revealing the potential underlying risks and uncertainties tied to PPPs and driving CEOs’ attention to these negative aspects. When CEOs are equipped with multiple internal information sources concerning the interactions between the Chinese public and private sectors, their capacity to understand and process the intricate complexities and uncertainties of PPPs is enhanced compared to those without additional internal information sources. This heightened awareness directs CEOs’ attention toward risk and uncertainty-related factors and fosters a more cautious stance regarding participation in PPPs.

Hypothesis 2 (H2): The negative effect of CEO cross-sector work experience on PPP participation will be strengthened when CEOs have additional political connections.

Regional marketization

Organizations gather information not only from internal sources, such as managerial experience and individual connections, but also from external sources, including signals in their environments (Argote & Miron-Spektor, 2011; Levitt & March, 1988; Miner & Haunschild, 1995; Naumovska, Gaba, & Greve, 2021). According to information-processing theory, an organization's external environment frequently serves as a source of ideas and examples for potential strategies in the face of uncertainty and equivocality (Cooper & Wolfe, 2005).

Unlike internal information sources, external sources are more readily accessible to the public. While internal sources, such as cross-sector work experience and political connections, provide private information on less visible negative aspects of PPPs in China, external sources like regional marketization can publicize this information, thus narrowing the gap of information acquired by those with and without internal information channels. Previous research has established a strong correlation between the transparency of the information landscape and the level of marketization and regional economic development (Brown & Martinsson, 2019; Kong, Tao, Wang, & Chen, 2023). In more developed regions, government actions tend to be more transparent, thereby making the inherent risks of government–firm collaborations like PPPs more visible to the public. Consequently, the incremental impact of possessing private information channels diminishes, as the negative aspects of PPPs are less confined to the realm of private knowledge. This shift towards transparency in more developed regions makes the information environment of PPPs in China lean from ‘unbalanced’ towards ‘balanced’ nature. Conversely, in regions with lower levels of marketization, the absence of shared knowledge and information about the potential downsides of participation in PPPs becomes a more salient concern, primarily due to heightened information asymmetry and limited public oversight (Kuvaas, 2002).

In addition to influencing the disparity of information accessibiliby of the pros and cons in PPPs among private actors, regional marketization could also impact the quality of PPP projects in the regions. Compared to well-developed markets, areas with lower level of marketization are circumscribed by inadequately protected property rights and weak legal systems. Market underdevelopment increases the risks of state expropriation faced by firms, where politicians and bureaucrats may infringe on firm property and threaten firm value, thereby increasing the real risks of private participation in PPPs (Li & Zhang, 2007; Qian, Wang, Geng, & Yu, 2017). Therefore, in regions with underdeveloped markets, CEOs with work experience in non-private sectors are likely to gain more insights on the potential dangers of PPPs. On the contrary, in regions where the market is well-developed, the inherent risks of PPPs diminish. Consequently, CEOs with cross-sector work experience in these areas may possess insider information that includes fewer negative aspects compared to their counterparts located in underdeveloped regions.

Therefore, we anticipate that the negative impact of CEO cross-sector work experience on PPP participation decisions will be mitigated in contexts characterized by a greater presence of external or public information channels, coupled with less negative information of PPP due to proof of PPP quality, as typically observed in a high marketized region. Conversely, we expect the opposite pattern to occur when the regional marketization level is lower.

Hypothesis 3 (H3): The negative effect of CEO cross-sector work experience on PPP participation will be weakened when the regional marketization level is high.

Methods

Sample

We used several data sources to test our hypotheses. First, we collected information on firm PPP participation from the WIND dataset, which includes basic and financial information of Chinese publicly listed firms taken from their financial filings (Liu & Atinc, 2020). Within the dataset, we identified all announcements related to PPP negotiation, launch, and completion made by listed firms from 2013 to 2021. To ensure the accuracy of the announcements, each file was manually checked by two researchers. Unrelated or duplicated announcements were dropped. The remaining dataset included 538 PPP participation events for 217 firms.

We then acquired CEO cross-sector work experience data from CSMAR, which is a dataset that is commonly used for corporate governance research in the Chinese context (Wang & Qian, 2011). Following earlier research on CEO cross-sector work experience, we downloaded the resumes of all CEOs of publicly listed firms in China. Ten research assistants manually coded each CEO's work experience following the procedures outlined below (Crossland et al., 2014). First, each CEO's full employment history since completing formal education was chronicled. All organizations that the individual had worked for were then highlighted in the file. Organizations relating to prior work experience were only viewed as distinct if the individual joined the organization as an outsider. That is, if an organization changed its name, merged with (or was acquired by) another organization, or was spun off from a parent organization, it was not coded separately. Finally, each distinct organization was categorized into one of four groups: government (i.e., Department of Finance), public institutions (i.e., public schools, hospitals), state-owned enterprises, and private firms. Government departments and public institutions were identified according to China's State Organizational Structure as published by the Chinese government. State-owned enterprises and private firms were identified by ownership structure. Ownership information was acquired from TianYanCha⁵, a privately owned website registered with China's State Administration for Industry and Commerce and relevant regulators. TianYanCha provides big data services and rich information about Chinese companies and has been widely used in management studies in the Chinese context (Li, Li, Wang, & Thatcher, 2021). In the end, the number of organizations falling into each category was counted for each CEO, in preparation for the measurement of CEO cross-sector work experience, the process of which is explained in detail later.

For moderators and control variables, we drew complementary data on CEO demographics, as well as firm-level and region-level characteristics from CSMAR, WIND, and National Economic Research Institute (NERI) databases. We pooled observations from these sources to obtain a consolidated dataset on PPP engagements and CEO cross-sector work experience in China. The final sample included 2,805 firms ranging from 2014 to 2020.

Measures

CEO cross-sector work experience

To emphasize the differences in the institutional knowledge of CEOs, we measure CEO cross-sector work experience using a dummy variable indicating whether the CEO had experience in non-private organizations before joining the focal firm. According to Chinese organizational structures, we include government, government-affiliated institutions, and SOEs as non-private organizations (Xu, Lu, & Gu, 2014). If the CEO has worked in any of three types of organizations, the variable takes the value of 1, otherwise 0. To ensure the robustness of our results, we created several other measures of CEO cross-sector work experience, which are explained later in more detail.

PPP participation

Our dependent variable is measured by counting the number of PPP projects launched by the focal firm in the focal year.

Regional marketization

One of our moderators, the regional marketization score, was obtained from the NERI database published by Wang, Fan, and Yu (2017). It measures the degree of marketization at the province level and has been widely used in previous studies (Chang & Wu, 2014; Zhang, Marquis, & Qiao, 2016). We collected the location of each firm's headquarters and coded the regional marketization score based on in which province the firm is located.

Political connection

The other moderator, political connection, was measured by a dummy variable which equals 1 if any of the firm's top executives simultaneously served in government institutions such as the National People Congress (PC) or the Chinese People's Political Consultative Conference (CPPCC)⁶ (Fan, Wong, & Zhang, 2007).

Control Variables

We further included a range of control variables in the estimation models that are expected to affect the participation of private firms in PPPs. First, at the CEO level, we controlled CEO gender with male coded as 0 and female coded as 1; CEO age was measured as the focal year minus the CEO birthyear; CEO education was measured as an ordinal variable that indicates the level of education of each CEO (1 = high school and under; 2 = college degree; 3 = bachelor's degree; 4 = master's degree; 5 = PhD degree); CEO functional background was measured by the number of distinct functional areas the CEO had worked in, emphasizing the variety of work experience in terms of industry sectors, firms, and functional areas (Crossland et al., 2014).

At the firm level, we controlled for some basic firm characteristics that may affect a firm's PPP involvement including firm age, measured by the number of years since the firm was founded; firm size, measured by the log value of a firm's assets; and firm profitability, measured by firm's return on assets (ROA). Prior research has suggested that R&D activity could affect firm PPP performance (Das & Teng, 1999; Keers & van Fenema, 2018). Therefore, we added R&D expenditure, measured by the log value of the firm's R&D investment in the focal year. Time effects are controlled for by adding the set of year dummy variables.

Model Specification

Given the nature of our dependent variable as a count variable (i.e., discrete and non-negative values), Poisson and negative binomial models are the preferred empirical approaches. Compared to a Poisson distribution that assumes the mean equals the variance, a negative binomial distribution allows more flexibility by allowing the mean and variance to differ. Furthermore, the result of a likelihood-ratio test of overdispersion was significant for the dependent variable, indicating negative binomial models are more appropriate for our data (Cameron & Trivedi, 1986; Hausman, Hall, & Griliches, 1984). We thus used a negative binomial model to test our hypotheses. Another econometric concern was the large number of zero observations. As a robustness check, we estimated an equation using a zero-inflated negative binomial regression (Greene, 2000).

Given the panel structure of our data, we estimate between-firm variances with random firm effects to account for unmeasurable firm-specific effects over repeated sampling (e.g., Ahuja, 2000). We chose a random-effects model instead of a fixed-effects model because the latter exclusively relies on within-unit variance and thus, may produce incorrect point estimates and inflated standard errors for variables that exhibit relatively little change within units (Funk, 2014). As mentioned above, fixed-effects Poisson regression models also assume the variance of the dependent variable equals the mean of the dependent variable, which is not always satisfied. Given that random-effects Poisson models for panel data do not rest on this assumption, we followed early studies and incorporated a random firm effect (Wu, Levitas & Priem, 2005). We also conducted robustness checks by using fixed-effects models to offer a complete picture of the empirical findings. We included year fixed-effects to account for unobserved heterogeneity across time periods and lagged the predicting variables by a year to alleviate potential issues of simultaneity. Table 1 shows the descriptive statistics of and inter-correlations between all variables.

Table 1. Summary statistics and correlations

Note: n = 14,054.

Results

Table 2 presents the regression results. Models 1–5 progressively add control variables, independent variables, moderators, and interaction terms to test the hypotheses. Model 1 represents the baseline model where only control variables have been included. Firm size is positively related to firm PPP participation, while firm R&D expenditure is negatively correlated with PPP participation. Model 2 adds CEO cross-sector work experience as the primary predictor. The coefficient of CEO cross-sector work experience is significantly negative (b = −0.404, p < 0.1), showing that when CEOs have cross-sector work experience, firms tend to participate in PPPs 0.404 units less. This finding supports H1 that CEO cross-sector work experience is negatively correlated with a firm's PPP participation.

Table 2. Random-effects negative binomial regression results: CEO cross-sector work experience—dummy as independent variable

Notes: Coefficients for calendar year dummy variables not reported. Standard errors in parentheses. ***p < 0.01, **p < 0.05, *p < 0.1.

Models 3 and 4 add the moderators, political connection and regional marketization, respectively, as well as their interaction terms with CEO cross-sector work experience. In Model 3, consistent with H2, the coefficient of the interaction term is negative and significant (b = −1.037, p < 0.05), indicating that the negative effect of CEO cross-sector work experience on PPP participation becomes stronger when political connections are present. More specifically, when CEOs possess political connections, firms tend to participate in PPPs by 1.037 units less, in addition to the decrease of 0.404 units brought by cross-sector work experience. In Model 4, the coefficient of the interaction term is positive and significant (b = −0.375, p < 0.01), showing a weakening effect, confirming the main hypothesis that a higher marketization lessens the negative effect of CEO cross-sector work experience on PPP participation. More specifically, when a firm is located in a highly marketized environment, the negative effect of CEO cross-sector work experience on PPP participation will decrease by 0.375 units. Model 5 presents the full model with the inclusion of both interactions. In the full model, CEO cross-sector work experience has a significant negative association with PPP; the two interaction terms retain the same sign and significance level, providing strong support for our hypotheses.

As mentioned earlier, one important econometric concern is the presence of a large number of zeros in our dependent variable. We controlled for this potential problem through a zero-inflated negative binomial regression (Greene, 2000). A zero-inflated negative binomial model, also known as a hurdle model, assumes that the zeros are generated by a different process from the remaining counts. A binary probability model determines whether a zero or a nonzero outcome occurs; in the latter case, a (truncated) negative binomial distribution then describes the positive outcomes. Following previous research, we include CEO duality, Top Management Team (TMT) size, and board size as predictors in the binary probability regression (Boone, Lokshin, Guenter, & Belderbos, 2019; Fosfuri, 2006), and results are robust using other predictor combinations. Regression results for the (truncated) negative binomial distribution are shown in the last column of Table 2. All variables of theoretical interest maintain their significance.

We also plotted the moderation effects of political connection and regional marketization in Figures 2 and 3. As depicted in Figure 2, an increase in political connection amplifies the negative effect of CEO cross-sector work experience on PPP participation. This negative effect is particularly evident when CEOs have additional political connections, which suggests that an abundant level of institutional knowledge is necessary for CEOs to comprehend the true uncertainty of PPPs and remain cautious toward participating. When CEOs have no political connections, however, the negative line flattens and slopes slightly upward, suggesting that political connection may have some other, unmeasured effect in assuring the negative impact of CEO cross-sector work experience on PPP participation, such as increasing a CEO's capability to process institutional information. As seen in Figure 3, an increase in the regional level of marketization attenuates the negative effect of CEO cross-sector work experience on PPP participation, once again flattening the line and causing a slight upward slope. The negative relationship between CEO cross-sector work experience and PPP participation is salient when the regional market development rate is low. When a market is well-developed, the negative relationship vanishes, which implies that marketization dissolves the negative effect of the complexity and uncertainty of PPPs on participation by private firms.

Figure 2. The interaction effect between CEO cross-sector work experience and political connection on firm PPP participation

Figure 3. The interaction effect between CEO cross-sector work experience and regional marketization on firm PPP participation

Robustness Checks

We ran a number of tests to verify the robustness of the results, first checking whether the results were sensitive to different measures of CEO cross-sector work experience. In the main analyses discussed above, we used the dummy variable to measure CEO cross-sector work experience (whether the CEO had previously worked in the public sector). In the robustness check, we reran the random-effects negative binomial regression using several other measures of CEO cross-sector work experience. First, we counted the number the distinct types of organizations (government, public institutions, SOEs, and private firms) the CEO had worked at prior to becoming CEO of the focal firm. We then count the number of all organizations regardless of type. Next, we created an ordinal variable to more accurately indicate the different levels of institutional knowledge/information. The ordinal variable took the value of 0 when the individual had no prior work experience before the focal firm, 1 if the individual had only worked in private firms, 2 if they had worked in SOEs, 3 if they had worked in government-affiliated institutions, and 4 if they had worked in the government. The last measure was a weighted variable that considered both the number of organizations and the type of organizations an individual had previously worked in. Organizations that are more closely related to the government were given a higher weight compared to purely private organizations. The measure took a higher value if the individual's prior career background focused on the public sector and a lower value if focused on the private sector, as shown below:

$$\eqalign{& {\rm CEO}\;{\rm cross}\;{\rm sector\ work\ experience} =\cr & \displaystyle{{{\rm number\ of\ private\ firms}\,{\rm} + {\rm 2^\ast number\ of\ SOEs}\,{\rm} + {\rm 3^\ast public\ institutions}\,{\rm} + {\rm 4^\ast government}} \over {{\rm total\ number\ of\ distinct\ organizations}}}}$$

The different measures can be organized into the following categories: (1) category count: the sum of distinct organization types (government, public institutions, SOEs, and private firms); (2) total count: the sum of all organizations the CEO had worked in regardless of organizational type; (3) ordinal: 0 – no prior work experience in other organizations, 1 – only worked in private firms, 2 – SOEs, 3 – government-affiliated institutions, 4 – governments; and (4) weighted: see the formula above.

Tables 3–6 show the regression results using each measure of CEO cross-sector work experience, respectively. As the tables show, the significant negative relationship between CEO cross-sector work experience and PPP participation remains stable and consistent across all measures. The coefficient of CEO cross-sector work experience is not significant for the ‘category count’ measure in Model 1 but is significant and negative in the full model. Therefore, it can be said that, in general, we found strong support for H1 across all measures of CEO cross-sector work experience.

Table 3. Random-effects negative binomial regression results: CEO cross-sector work experience—category count as independent variable

Notes: Coefficients for calendar year dummy variables not reported. Standard errors in parentheses. ***p < 0.01, **p < 0.05, *p < 0.1.

Table 4. Random-effects negative binomial regression results: CEO cross-sector work experience—total count as independent variable

Notes: Coefficients for calendar year dummy variables not reported. Standard errors in parentheses. ***p < 0.01, **p < 0.05, *p < 0.1

Table 5. Random-effects negative binomial regression results: CEO cross-sector work experience—ordinal as independent variable

Notes: Coefficients for calendar year dummy variables not reported. Standard errors in parentheses. ***p < 0.01, **p < 0.05, *p < 0.1.

Table 6. Random-effects negative binomial regression results: CEO cross-sector work experience—weighted as independent variable

Notes: Coefficients for calendar year dummy variables not reported. Standard errors in parentheses. ***p < 0.01, **p < 0.05, *p < 0.1.

The interaction terms in Tables 3–6 also reveal consistent moderation effects of political connection and regional marketization. The interaction term between CEO cross-sector work experience and political connection lost significance in the ‘total count’ measure but remained consistent with prior findings in the full model, showing moderate support for H2. The interaction term between CEO cross-sector work experience and regional marketization is significantly positive across all models, supporting H3.

We also ran fixed-effects negative binomial regressions for all the models described above. Table 7 shows the results for the full model using all measures of CEO cross-sector work experience. CEO cross-sector work experience remains negatively correlated with PPP participation and the results are consistent across all measures of our independent variable. The moderation effect of regional marketization remains the same. The interaction term between CEO cross-sector work experience and political connection, however, is insignificant in the fixed-effects model, which may be the result of a smaller sample, given that many observations were dropped due to the lack of variance in independent variables across the study.

Table 7. Fixed-effects negative binomial regression results

Notes: Coefficients for calendar year dummy variables not reported. Standard errors in parentheses. ***p < 0.01, **p < 0.05, *p < 0.1.

To mitigate the alternative mechanisms influencing private participation (e.g., government preference and selection), we also used survey data from 1,038 private firms in China from 2013 to 2014 to further examine our main hypotheses. Data sampling was supported by the State Council of the People's Republic of China and implemented by the China Entrepreneurs Survey System (CESS) (Li & Tang, 2010). First, we requested that CEOs report their career path using the following statement: ‘If you work in a private enterprise, what kind of situation do you belong to’? CEOs were then able to choose one of the following four options: (1) always work in private enterprise(s); (2) move from state-owned enterprise(s) to a private enterprise; (3) move from foreign-invested enterprise(s) to a private enterprise; and (4) others (for which they were given the opportunity to explain). In our sample, approximately 29.4% of respondents had always worked for private enterprises, 59.0% had moved from SOEs, 3.0% had moved from foreign-invested enterprises, and 8.6% selected the ‘other’ option. We constructed the measure for CEO cross-sector work experience with a dummy variable, which was coded as 1 if the CEO had moved from an SOE to a private enterprise and 0 otherwise. Then, CEOs were asked a single item about PPP intention: ‘What's your enterprise's intention of participating in Public–Private partnership'? The scale ranged from 1 (very willing) to 4 (not interested) and the variable was reversely coded. We find significant support for our hypotheses (see Table 8).

Table 8. OLS regression results (survey data)

Notes: n = 1,011; Standard errors in parentheses; Two-tailed tests. *p < 0.10, **p < 0.05, ***p < 0.01.

Discussion

Theoretical Contributions and Practical Implications

This article sheds light on the practical puzzle of why the participation rate of private enterprises in PPPs remains low in some emerging economies, despite the popularity and efficiency of PPPs in solving societal issues. Using a longitudinal dataset of Chinese private listed firms from 2013 to 2021, we reveal an interesting interplay between CEO cross-sector work experience and firm PPP participation. Prior work experience in non-private sectors does not drive private CEOs towards greater participation in PPPs; instead, it appears to discourage them from participating in PPPs by offering additional tacit information and improving their awareness of the underlying hazards of engaging in PPPs. Furthermore, we find that this negative effect of CEO cross-sector work experience on PPP participation is strengthened if the CEO has political connections that serve as a complementary private information channel and is weakened if the firm is located in an area where the free market is well developed and a greater amount of information is publicly available. Our findings call back to the empirical puzzle shown in Figure 1, which indicates that potential risks and hazards of participating in PPPs become increasingly apparent to the public over time, and this heightened awareness leads to a decline in the number of private firms willing to participate in PPPs. As one of the first empirical studies linking CEO career background and PPP formation, our analysis carries several important implications for the study of managerial and organizational theories.

First, we focus on a prominent but under-explored phenomenon in the management and organization literature—public–private partnerships (Mahoney et al., 2009; Quélin et al., 2017). The existing literature on public–private engagements is fragmented among several research streams, including public administration, organizational economics, and project management (Kivleniece & Quelin, 2012). Previous research, though providing critical insights, has been largely restricted to examining the outcomes of PPPs at the institutional and organizational levels (Noble & Jones, 2006). It has overlooked the engagement of the private sector, especially under which conditions private actors are more or less willing to engage in the spheres of public interest through participation in PPPs (Quelin et al., 2019), and how individual actors, especially top managers, make decisions on forming such inter-organizational relationships (Noble & Jones, 2006; Williams, 2002). To fill this gap, we draw from upper-echelon theory and the information-processing perspective to analyze how CEOs’ prior work experience affects their willingness to participate in PPPs. In developing institutional environments, cross-sector collaborations between public and private sectors contain fundamental hazards for private actors, caused by higher objective conflicts, administrative controls, information incompleteness, and policy uncertainties (Coff, 1999; Pache & Santos, 2013; Quelin et al., 2019; Williamson, 1999). CEOs who are better informed of the underlying risks and challenges will be disincentivized from participating in PPPs. This micro-level analysis offers a new theoretical mechanism for the formation of PPPs and opens, to some extent, the ‘black box’ of why the participation rate of private firms in China in PPPs is low. It allows for a more nuanced view of private participation in PPPs in different institutional contexts and responds to the call for further research on the challenges and drawbacks of participating in PPPs.

Second, we extend the literature on upper-echelon theory by focusing on a new and specific dimension of CEO career background—work experience in different organizational forms (i.e., public and private organizations). The core principles of upper-echelon theory suggest that the dispositions, cognitions, and experiences of executives influence firm strategic decisions (Hambrick & Mason, 1984). Within this stream of research, a substantial body of work has examined the impact of the past career experiences of executives on firm behavior and performance. However, most of the existing studies pay attention to executives’ functional background (e.g., work experiences in different functional areas, such as production, sales, management, finance, and law), while largely neglecting their institutional backgrounds (e.g., work experiences in different types of organizations and countries). In this article, we examine organizational form as an institutional area and examine CEOs’ prior work experiences in non-private sectors before moving to their current role in the private sector. We argue that this array of experiences can shape executives’ cognition and sensemaking for public and private sectors, influencing both their knowledge base and information processing of the novel PPP hybrid form. Instead of emphasizing market-oriented knowledge like most of the prior constructs, our concept primarily captures CEOs’ accumulation of institutional knowledge and information.

Third, we contribute to the discussions on both PPPs and CEOs’ career backgrounds by adopting an information-based perspective. More specifically, our study is one of the first to reveal a unique information feature of PPPs in developing countries like China. We stress that PPPs do not emerge within an information vacuum but rather within an information environment characterized by unbalanced government disclosure, where the pros are publicized while the cons remain largely hidden. This situation creates a relative power and information disadvantage for the private sector. In contrast to previous studies rooted in economic perspectives that regard information asymmetries in PPPs as a general feature, we advocate for new research on PPPs that considers a more comprehensive approach, encompassing both the availability and content of information (Dorobantu et al., 2024). Furthermore, we challenge the conventional finding of a positive relationship between information volume and a CEO's strategic actions (Kuvaas, 2002). Previous research has predominantly examined how increased information volume leads to over-confidence for decision-makers and subsequently higher levels of strategic adoption. However, our approach shifts the focus toward the interplay between two critical dimensions of the information environment—information availability and thematic content—and illustrates that additional information regarding the negative aspects of PPPs can also redirect CEOs’ attention toward the hazards and risks associated with engaging in a novel, complex, and volatile strategic issue like PPP (Daft & Weick, 1984; Dutton, 1993; van Knippenberg et al., 2015). Consequently, this redirection leads to a reduced inclination to participate in these partnerships.

Our study also carries important implications for practitioners. It demonstrates that the complexity, ambiguity, and uncertainty of PPPs drive private actors away from partnering with the government, thereby hindering the development of PPPs, particularly in developing economies. Our findings suggest that a well-developed market is helpful in dissolving uncertainty and encouraging private participation in PPPs. National governments can promote public–private partnership by fostering an open, free market in which the power imbalance between public and private sectors and information incompleteness for the private sector are minimized. For private actors, we reveal the importance of institutional knowledge and information in capturing the inherent risks and uncertainties behind PPPs in developing countries. Managers should exercise caution so as not to oversimplify complex strategic issues or underestimate the underlying hazards within. In addition, we recommend that managers consider multiple information channels including individual and firm connections, personal experiences and public media reports. For those who lack the prior experience through which to acquire necessary information and knowledge, building social networks, such as establishing political connections, can also be a valuable way to access relevant resources and information.

Limitations and Future Research Directions

This study has several limitations that may serve as potential directions for future research. First, in analyzing Chinese publicly listed firms, our study is based on a single country. Although China serves as a representative developing economy with a relatively immature market system and a powerful central government, we still encourage further investigations of other developing countries to expand the generalizability of the findings. Future research could also conduct cross-national studies and comparative analyses between developed and developing economies to determine whether there are systematic differences in the mechanisms we proposed.

Second, our study does not take into consideration the dispositional determinants of CEO background in different sectors. Previous literature has reported a wide range of different antecedents (i.e., family factors, job blockages, and emerging opportunities) that determine executives’ roles in distinct organizational forms (Lachman, 1985; Xu et al., 2014). The varied legitimizing goals and basic orientations determine different institutional milieux, and hence the different environmental perceptions of CEOs (Lachman, 1985). CEOs who move from the private sector to non-private sectors, for instance, tend to present a pattern of reliability, patience, and incremental advances. Conversely, CEOs moving from the public sector to the private sector may engage in more changes, experimentation, and novelty in general. In addition to the institutional environment that might allow one to gain institutional knowledge, dispositional tendencies might reinforce this behavioral construct on multiple fronts. We consider this a promising line of research for future inquiry.

Third, we primarily focus on a single dimension of CEO characteristics—CEO cross-sector work experience—and its effect on firm PPP participation. CEOs may possess other characteristics that also influence PPP participation. Future research could delve into the exploration of other demographic traits or psychological aspects of CEOs that might impact their decision-making in relation to PPPs. Additionally, while CEO cross-sector work experience is a behavioral construct measured by CEOs’ prior actions, it is based on assumptions related to individual psychological traits. Future studies may try to reveal the psychological mechanisms that underlie the relationship between CEO cross-sector work experience and PPP participation, providing a more comprehensive understanding of the micro-decision-making process.

Finally, although our focus has been strictly on CEOs, there are great possibilities to explore the implications of the cross-sector work experience of employees at other organizational levels (Crossland et al., 2014). To our knowledge, there has been no research to date on the in-role impact of supervisors and employees’ work experiences in different sectors. It is essential to examine whether supervisors or employees manifest their non-private work experience in job behaviors. Beyond the large amount of strategic literature on the international experiences of executives (Le & Kroll, 2017; Slater & Dixon-Fowler, 2009), research in the field of organizational behavior has also focused on employees’ international experiences and their various outcomes, such as creativity (Saad, Damian, Benet-Martinez, Moons, & Robins, 2013) and immoral behavior (Lu et al., 2017). Extending our concept of cross-sector work experience to employees might offer new insights into the antecedents of various organizational behaviors.