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Article
Publication date: 2 May 2017

Markus Voeth and Aline Christiane Lenzing

Renegotiations not only promise an economically relevant improvement of the original negotiation outcome for the communicator of the demand but also imply a potential…

Abstract

Purpose

Renegotiations not only promise an economically relevant improvement of the original negotiation outcome for the communicator of the demand but also imply a potential threat to the business relationship. The purpose of this paper is to examine the impact of renegotiations in detail and to provide practical implications for the optimal usage of renegotiations by analyzing potential renegotiation strategies.

Design/methodology/approach

Structural equation modelling was used to analyze the data of 255 negotiation experts collected via a standardized online questionnaire.

Findings

Social psychological outcome of renegotiations has the most relevant impact on relationship continuity (RC). The impact of economic outcomes is wholly mediated by the social psychological outcome. Regarding the use of different renegotiation strategies, other-oriented strategies and direct communication are most successful, whereas self-oriented strategies correlate negatively with all results.

Research limitations/implications

The study’s sample is drawn from Germany, which requires careful consideration of the results’ generalizability.

Practical implications

When demanding renegotiation, practitioners should apply strategies characterized by other-orientation and direct communication to increase the probability of RC. For the sake of the business relationship, self-oriented strategies should be avoided.

Originality/value

This paper presents the first detailed analysis of the impact of renegotiations on business relationships and investigates the effects of different renegotiation strategies on renegotiation outcomes and RC; hence, it is of great value for practical usage and may serve as a stepping stone for further research.

Details

Journal of Business & Industrial Marketing, vol. 32 no. 4
Type: Research Article
ISSN: 0885-8624

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Article
Publication date: 18 November 2013

Nikos Nikolaidis and Athena Roumboutsos

The purpose of this paper is to present a framework approach to guide the identification of potential public private partnership (PPP) renegotiation outcomes is presented…

Abstract

Purpose

The purpose of this paper is to present a framework approach to guide the identification of potential public private partnership (PPP) renegotiation outcomes is presented. The framework is applied to a road concession project under renegotiation in Greece.

Design/methodology/approach

The framework combines the estimation of stakeholder payoffs with respect to the various strategic options available. Their potential acceptance is evaluated with respect to the power distribution within the stakeholder network. The contextual environment determines the respective power position of each stakeholder in the network.

Findings

The proposed framework is applied to a road concession case in Greece, under renegotiation as a result of the economic crisis. The analysis highlights the importance of the contextual environment and the limitations of solutions that seem “satisfying” for all stakeholders involved.

Social implications

The framework is designed to guide both public and private parties involved in the renegotiation processes in identifying potential solutions or the inability to reach outcomes under specific contextual environments. Assessments are made based on expert knowledge rather than data collection, which is impossible during the renegotiation phase. The application proposed process limit renegotiation transaction costs.

Originality/value

The renegotiation framework based on stakeholder payoffs and power theory, is an approach especially useful for complex contract renegotiations, where multiple stakeholders influence the final outcome. The importance of the contextual environment is highlighted. In addition, the paper contributes to the empirical renegotiation literature.

Details

Built Environment Project and Asset Management, vol. 3 no. 2
Type: Research Article
ISSN: 2044-124X

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Article
Publication date: 4 January 2016

Joaquim Miranda Sarmento and Luc Renneboog

As public-private partnerships (PPPs) have become more widespread, doubts and criticisms about this type of infrastructural projects have emerged. The authors describe the…

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Abstract

Purpose

As public-private partnerships (PPPs) have become more widespread, doubts and criticisms about this type of infrastructural projects have emerged. The authors describe the PPP framework, discuss the financial structure and risk-sharing processes, and dissect the structure and organisation. The authors address the following questions: what are the main organisational characteristics of PPPs? How does the private sector structure and finance PPPs? And why and how are PPP contracts renegotiated? The paper aims to discuss these issues.

Design/methodology/approach

This paper draws on extensive theoretical and empirical research, which is presented in a literature overview on PPPs and their renegotiations. A comprehensive review is carried out and two case studies are developed to investigate the reasons behind success and failure of PPPs and the renegotiation of contracts.

Findings

Incomplete contracts and the long duration of concessions can bring uncertainty and change to PPPs. Joint decision making can be difficult due to different parties involved. Renegotiation outcomes tend to rely on the position of the government. In Fertagus, the private sector asked for financial help led to a very balanced agreement. Conversely, Lusoponte renegotiations were initiated by the government, which significantly changed the project. Instead of relying solely on commercial revenues, Lusoponte was substantial financed by public funds.

Research limitations/implications

Incomplete contracts and the long duration of concessions bring about much uncertainty to PPPs. Ex post decision making in PPPs in the wake of changing risks is difficult as it necessarily involves negotiations between the public sector and the private firm. The paper shows that marked differences in renegotiation outcomes emerge. In one case study, the private sector asked for financial help and the negotiation outcome was a very balanced agreement. Conversely, renegotiations in a second case were initiated by the government mainly for political reasons, resulted in a significant change in the PPP’s structure, risk, financing, and returns, and yielded a large public losses.

Practical implications

Contrasting successful and unsuccessful PPPs enables the reader to examine the opportunities and pitfalls in case of PPP renegotiations, which frequently occur. He can gain insight in the determinants of negotiation outcomes and the importance of a governmental PPP entity as well as of an independent monitor such as a court of audits.

Originality/value

This paper should be useful for both academics and practitioners and should help increase the understanding of the several stages, structures, and renegotiation processes associated with PPPs.

Details

International Journal of Managing Projects in Business, vol. 9 no. 1
Type: Research Article
ISSN: 1753-8378

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Article
Publication date: 1 March 2019

Amira Shalaby and Amr Hassanein

Public private partnership contracts tend to have longer contract durations compared to other conventional procurement methods. A contract renegotiation becomes inevitable…

Abstract

Purpose

Public private partnership contracts tend to have longer contract durations compared to other conventional procurement methods. A contract renegotiation becomes inevitable in most of the cases. The renegotiation process usually develops a number of scenarios in order to regain the contract equilibrium. The purpose of this paper is to facilitate the renegotiation process by offering an automated system to select the optimum renegotiation scenario that preserves the rights and the interests of the project stakeholders.

Design/methodology/approach

The common renegotiation scenarios used are: increasing the service charges, increasing the concession period or paying a lump sum amount to the party of concern in order to maintain a fixed rate of return and keep the return on equity constant. In this paper, a method of selecting the optimum scenario among the different scenarios is proposed. This is done using a weighted sum model to calculate the weights and ranks of a number of factors influencing the stakeholders’ decisions. A DSS is developed with the aid of Microsoft Excel, VBA programming language, and the Precision Tree 5.5 for Excel add-in.

Findings

The renegotiation process has been facilitated by using an automated system that maximizes the benefits of both the public sector and the private sector. The optimum renegotiation scenario has been selected for the case of the model.

Originality/value

The developed framework is of great benefit to project stakeholders, including the private sector, the public sector and the users of the service. It saves time and money invested in lengthy negotiations, and it enforces transparency and mutual trust between the different parties by providing a tool that significantly minimizes conflicts during the renegotiation process and defines clear steps to be followed in order to reach an agreement that will maximize the benefits for both the private and the public sectors.

Details

Engineering, Construction and Architectural Management, vol. 26 no. 6
Type: Research Article
ISSN: 0969-9988

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Article
Publication date: 9 April 2018

Akintayo Opawole and Godwin Onajite Jagboro

The purpose of this paper is to develop compensation mechanisms against risks factors that impact private party’s costs in concession-based projects as a basis for…

Abstract

Purpose

The purpose of this paper is to develop compensation mechanisms against risks factors that impact private party’s costs in concession-based projects as a basis for minimizing failure rate of concession contracts.

Design/methodology/approach

The study extended earlier work on the factors that impact private party’s costs in concession-based projects by developing compensation mechanisms against the risks factors. It commenced with semi-structured face-to-face interviews which were launched with different stakeholders organizations that had been involved in PPP contracts in the Southwestern Nigeria. Responses from the interview were analyzed using interpretative phenomenal analysis via ATLAS.ti6/7. The mechanisms identified from literature review were assessed through structured questionnaire which were administered on professionals selected from governmental-based organizations (ministries, agencies, corporations/parastatals, etc.), private developers/concessionaires, law firms, banks among others, using the respondent-driven sampling technique. The robustness of the quantitative data was achieved by including the initial respondents to the interview in the questionnaire survey. The quantitative data were analyzed using percentile for better understanding of the flexibility between “most” and “more” preferred mechanisms. The criterion for the selection of appropriate mechanism(s) for the factors was based on minimum average of 20.0 percent (the ratio of maximum percentage (100 percent) of the respondents to total number of variables) suggesting the five identified mechanisms. The results in both cases of qualitative and quantitative assessments were compared. Based on the convergences of the findings, preferred compensation mechanisms were developed against concession contract risk factors.

Findings

Options of mechanisms were developed against specific investment risks that are consequent to the defaults of the public party in PPP contracts. The findings indicate that the mechanisms in extant literature with respect to administration of traditional models are relevant for PPPs. The study, however, identified new concepts, including “compensative” “zero compensation,” “equitable sharing” and “adjustment of concession period,” which are suitable in specific cases of PPP contracts.

Practical implications

The study contributes to the body of knowledge on mechanisms for improving PPP project performance. Moreover, insights were provided on mechanisms that satisfy private investor in case of specific risk factors investigated. The findings are therefore expected to guide private party in the preparation of concession contract package that minimizes investments risks and thereby attracting more private investors both from local and international environments. The findings of the study would also contribute to the body of information for documenting standard conditions of concession contract in Nigeria.

Originality/value

Studies on critical performance factors on PPP were extended by developing compensation mechanisms against the investment risks that impact private party’s cost.

Details

International Journal of Building Pathology and Adaptation, vol. 36 no. 1
Type: Research Article
ISSN: 2398-4708

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Book part
Publication date: 22 September 2009

Eric Brousseau and Stéphane Saussier

There exists a tremendous number of studies in strategy and management journals concerning contracting issues between private firms. Those studies are usually grounded in…

Abstract

There exists a tremendous number of studies in strategy and management journals concerning contracting issues between private firms. Those studies are usually grounded in competing theoretical frameworks such as transaction cost economics, the resource-based view of the firm, incentive and agency theories and few others. However, very few studies, especially in those reviews (this is also true to a lesser extent in economic journals), are concerned with the issue of contracting between private firm and government. This is particularly surprising since existing theoretical frameworks qualified to tackle contracting strategies between private firms can also provide insights into issues related to contracting with government.

Details

Economic Institutions of Strategy
Type: Book
ISBN: 978-1-84855-487-0

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Article
Publication date: 24 April 2020

Hong Zhang, Lu Yu and Wenyu Zhang

This study is aimed to explore the dynamic performance incentive model for a flexible PPP contract to handle uncertainties based on supervision during the long-time…

Abstract

Purpose

This study is aimed to explore the dynamic performance incentive model for a flexible PPP contract to handle uncertainties based on supervision during the long-time concession period, so as to ensure operation performance and benefits of the public sector while protecting the economic benefit of the private sector, thus avoiding unnecessary renegotiation.

Design/methodology/approach

The microeconomic and principal–agent theories and relevant studies on the basic incentive model and flexible contract are fully utilized. The procedure for developing the dynamic incentive model and the assumptions about the quantitative relationships among fundamental variables or factors are first proposed. The static incentive model without incentive parameter adjustment and then the dynamic incentive model allowing incentive parameter adjustment are successively developed. Finally, the propositions regarding the valid adjustment ranges of the incentive parameter with respect to the economic, social and hybrid benefits of the public sector and the economic benefit of the private sector are suggested.

Findings

The dynamic incentive model enables to achieve a flexible contract to handle uncertainties on the PPP project to ensure the benefits of the public sector while protecting the benefit of the private sector. The economic, social and hybrid benefits of the public sector and the economic benefit of the private sectors can be respectively realized through adjusting the reward–punishment coefficient under different adjustment ranges and different importance. The incentive model is able to ensure the benefits of the public sector while protecting the benefit of the private sector by controlling the private sector's effort level unknown to the public sector.

Originality/value

The dynamic incentive model helps implement a flexible PPP contract to handle uncertainties during the operation period, thus controlling the effort level of the private sector and ensuring the benefits of the public sector while protecting the economic benefit of the sector. It enables to clarify the quantitative relationships between the operation performance, the benefits of the stakeholders, the effort level of the private sector and the reward–punishment coefficient. This study contributes to the domain knowledge of the incomplete contract theory for designing a flexible PPP contract with dynamic incentive and supervision mechanism by applying the microeconomic and principal–agent theories.

Details

Engineering, Construction and Architectural Management, vol. 27 no. 9
Type: Research Article
ISSN: 0969-9988

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Article
Publication date: 29 May 2019

Hui Sun, Yuning Wang and Jia Meng

The purpose of this paper is to develop a trading and pricing method of expansion option (EO) model to solve expansion problems of build-operate-transfer (BOT) freeway project.

Abstract

Purpose

The purpose of this paper is to develop a trading and pricing method of expansion option (EO) model to solve expansion problems of build-operate-transfer (BOT) freeway project.

Design/methodology/approach

This paper proposes an ex ante mechanism through trading the EO to avoid the transaction costs. By editing the paths generated from binomial option pricing model, this paper establishes an American real option binomial lattice model and evaluates the value of EO. Data are collected from Liaoning province in China and the model is practiced in the context of a BOT freeway in Liaoning province.

Findings

Supported by empirical evidence, this study finds out that there exists a minimum price at which the government can sell the EO and a maximum price that the private sector is willing to pay. When the minimum price is negative, the government should transfer the EO to the private sector free of charge to avoid the transaction costs. Otherwise, the government should sell the EO at a reasonable price to protect public interests.

Practical implications

The study can be used for the government to reducing the transaction costs. By using the trading EO model, the government can sell its share of the EO to the private sector to manage its resources efficiently.

Originality/value

This paper builds a trading EO model to solve expansion problems instead of renegotiations. In addition to reducing the transaction costs for the whole society, trading EO can also raise the respective payoffs of both public and private sectors. An EO trading framework and algorithm is further developed. It realized an American option model, making the owner can exercise the option whenever he wants. Thus, the whole model is adapted to best fit BOT highway practice.

Details

Engineering, Construction and Architectural Management, vol. 26 no. 7
Type: Research Article
ISSN: 0969-9988

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Expert briefing
Publication date: 21 March 2019

Renegotiation of the Itaipu treaty.

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Article
Publication date: 31 August 2021

Jonna Koponen, Saara Julkunen, Mika Gabrielsson and Ellen Bolman Pullins

The purpose of this paper is to explore how business-to-business (B2B), intercultural, interpersonal salesperson–customer relationships develop using the lens of identity…

Abstract

Purpose

The purpose of this paper is to explore how business-to-business (B2B), intercultural, interpersonal salesperson–customer relationships develop using the lens of identity management theory (IMT; Imahori and Cupach, 2005).

Design/methodology/approach

The research uses qualitative semi-structured interviews on 18 targeted relationships with customers from another culture conducted with business-to-business salespeople.

Findings

The findings indicate that our respondents' relationships moved from trial toward enmeshment and on occasion toward the renegotiation phase, as described in IMT. In the case of low cultural diversity between salesperson and customer, the relationships reached the trial and enmeshment phase. In the case of high cultural diversity between salesperson and customer, the relationships on occasion evolved toward the renegotiation phase. Salespeople's cultural intelligence (CQ) facilitates the development of interpersonal, intercultural salesperson–customer relationships.

Originality/value

The authors transfer IMT from the personal relationship development arena to B2B intercultural, interpersonal relationships, address a gap in the literature in the understanding of salesperson–customer interpersonal relationships in different contexts and develop a theoretical model to understand intercultural, interpersonal salesperson–customer relationship development across different levels of cultural diversity.

Details

International Marketing Review, vol. 38 no. 6
Type: Research Article
ISSN: 0265-1335

Keywords

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