Controlling Partner Opportunism in Cross-Sectoral Alliance: Dynamics of Governance Flexibility

One of the measures of governance effectiveness of alliance is the extent of opportunism. Controlling partner opportunism is more challenging in cross-sectoral alliances such as public–private partnerships. Coupled with institutional voids, a vicious cycle of partner opportunism can get created, leading to the complete failure of cross-sectoral partnerships in emerging economies. Building on extant literature on inter-organizational governance, we examine how governance flexibility plays a critical role in controlling opportunism. We analyze a unique case of one of India's largest public health insurance programs designed and delivered through public–private partnerships. We demonstrate how governance flexibility enables alliance partners to control opportunism, considering contract incompleteness and poor contract enforceability in emerging economies. By mapping different types of opportunism and partner governance responses, we demonstrate the effect of power differences and institutional voids on governance flexibility. We present key research propositions on governance flexibility and argue that governance flexibility can considerably improve the effectiveness of public–private partnerships.