Managing operational risks in public private partnerships (PPPs): social capital and management control systems (MCS) perspectives

Research on Public Private Partnerships (PPPs) has largely overlooked the management of risks at the operational phase of such partnerships. This study investigates how management control system (MCS) mechanisms, namely Simons’ (1995) four levers of control (LOC), belief, boundary, diagnostic, and interactive controls coupled with social capital influences relational and performance risks. Based on in-depth interviews of managers and other key stakeholders in a large infrastructure PPP in Sri Lanka, we examine how bonding capital weaken with relational stresses and partnership trust breakdowns while bridging capital is dependent on clear articulation of performance expectations and boundaries. Our findings reveal that the effectiveness of control levers on developing social capital depends on institutional logics alignment between the public and private actors, the distribution of decision-making power, and the presence of a legitimate intermediary. This study contributes to social capital and MCS literature by exploring how LOC shape and repair social capital in hybrid governance settings.