Interaction of governance ambidexterity and the institutional environment on handling uncertainty in public-private partnerships

Purpose Misaligned governance arrangements that do not match the characteristics of public-private partnerships (PPPs) fail to address uncertainties from unforeseeable external changes and partners' behavior, resulting in underperformance. This study examines how balanced contractual and relational governance interacts with the institutional environment to effectively handle uncertainty. Design/methodology/approach Extending ambidexterity research to the PPP domain, this study investigates the divergent impact of the combined (the absolute magnitude of contractual and relational governance) and balanced (their relative magnitude) dimensions of governance ambidexterity on uncertainty handling. It further examines the moderating role of the institutional environment. The research model was tested using structural equation modeling based on data collected from 369 Chinese PPP practitioners via a questionnaire survey. Findings The combined dimension reduces effectiveness in handling uncertainty, whereas the balanced dimension enhances it. The institutional environment influences effectiveness directly and positively by moderating the effect of the balanced dimension, though not the combined dimension. Balanced governance mechanisms and a strong institutional environment are necessary yet insufficient alone to ensure effective uncertainty handling. Practical implications Policymakers should prioritize strengthening institutional environments. Partners must balance contractual and relational governance to enhance adaptability to uncertainty, thereby improving performance. Originality/value This study integrates the combined and balanced dimensions of governance ambidexterity within the framework of new institutional economics (NIE). It provides nuanced insights into how micro-level balanced governance mechanisms and the macro-institutional environment interact to effectively address uncertainty in PPPs.