Impact of quality performance ambiguity on contractor's opportunistic behaviors in person-to-organization projects: The mediating roles of contract design and application

Abstract Contracts are critical for managing projects. However, studies increasingly found that contracts, albeit well written, might not be thoroughly implemented. This study aims to examine the impact of quality performance ambiguity on contractor's opportunistic behaviors in person-to-organization projects and to investigate the mediating role of contract design and application. A questionnaire-survey of 265 dwelling fit-out projects was undertaken in China. The results showed that quality performance ambiguity has great impacts on project development as it hinders detailed contract drafting, results in ineffective contract application and leads to opportunism. The mediation results showed that contract application rather than the written contract mediates the effect of quality performance ambiguity on contractor's opportunistic behaviors. Thus, it is recommended that project managers should pay attention to project characteristics and the gaps between the design and application of contracts in project management.

[1]  Simon von Danwitz.  Managing inter-firm projects: A systematic review and directions for future research , 2017 .

[2]  Patrick X.W. Zou,et al.  Drivers and barriers to adopting relational contracting practices in public projects: Comparative study of Beijing and Sydney , 2014 .

[3]  Baofeng Huo,et al.  Curbing opportunism in logistics outsourcing relationships: The role of relational norms and contract , 2016 .

[4]  Erik Mooi,et al.  Contract Specificity and Its Performance Implications , 2010 .

[5]  Roland Helm,et al.  Controlling contractual exchange risks in R&D interfirm cooperation: an empirical study , 2004 .

[6]  J. Turner,et al.  Farsighted project contract management: incomplete in its entirety , 2004 .

[7]  John V. Gray,et al.  Managing contract manufacturer quality in the presence of performance ambiguity , 2015 .

[8]  A. Ariño,et al.  Contractual Renegotiations in Strategic Alliances , 2002 .

[9]  Kyle J. Mayer,et al.  Learning to Contract: Evidence from the Personal Computer Industry , 2004, Organ. Sci..

[10]  P. He,et al.  The effectiveness of contractual and relational governances in construction projects in China , 2015 .

[11]  Marko Sarstedt,et al.  PLS-SEM: Indeed a Silver Bullet , 2011 .

[12]  Oliver E. Williamson,et al.  Asset specificity and economic organization , 1985 .

[13]  Yadong Luo,et al.  Contract, cooperation, and performance in international joint ventures , 2002 .

[14]  Guomin Zhang,et al.  Impact of Transaction Attributes on Transaction Costs in Project Alliances: Disaggregated Analysis , 2015 .

[15]  J. Turner,et al.  Erim Report Series Research in Management Project Contract Management and a Theory of Organization Bibliographic Data and Classifications , 2022 .

[16]  John Hulland,et al.  Use of partial least squares (PLS) in strategic management research: a review of four recent studies , 1999 .

[17]  Shuibo Zhang,et al.  Influence of Trust and Contract on Dispute Negotiation Behavioral Strategy in Construction Subcontracting , 2016 .

[18]  Ramanath Subramanyam,et al.  Contractual Provisions to Mitigate Holdup: Evidence from Information Technology Outsourcing , 2010, Inf. Syst. Res..

[19]  Fabrice Lumineau,et al.  An empirical investigation of interorganizational opportunism and contracting mechanisms , 2011 .

[20]  A. Ariño,et al.  Strategic alliance contracts: dimensions and determinants of contractual complexity , 2007 .

[21]  B. Looy,et al.  Toward An Integrative Perspective on Alliance Governance: Connecting Contract Design, Trust Dynamics, and Contract Application , 2008 .

[22]  I. Geyskens,et al.  The Formation of Buyer–Supplier Relationships: Detailed Contract Drafting and Close Partner Selection , 2005 .

[23]  Stephen J. Carson,et al.  Uncertainty, Opportunism and Governance: The Effects of Volatility and Ambiguity on Formal and Relational Contracting , 2006 .

[24]  Todd R. Zenger,et al.  Do Formal Contracts and Relational Governance Function as Substitutes or Complements , 2002 .

[25]  Michael D. Ryall,et al.  Formal Contracts in the Presence of Relational Enforcement Mechanisms: Evidence from Technology Development Projects , 2009, Manag. Sci..

[26]  Kyle J. Mayer,et al.  Designing Effective Contracts: Exploring the Influence of Framing and Expectations , 2011 .

[27]  Mona V. Makhija,et al.  The Role Of Organizational Controls In Managing Knowledge , 2006 .

[28]  Stewart Macaulay.  Non-contractual relations in business: a preliminary study , 1963 .

[29]  Mingming Duan.  The role of formal contracts with weak legal enforcement: A study in the Chinese context , 2012 .

[30]  Sai On Cheung,et al.  Exploring the influence of contract governance on construction dispute negotiation , 2008 .

[31]  Timo Braun,et al.  Projects as temporary organizations: An agenda for further theorizing the interorganizational dimension , 2018 .

[32]  Shannon W. Anderson,et al.  Management Control for Market Transactions: The Relation Between Transaction Characteristics, Incomplete Contract Design, and Subsequent Performance , 2005, Manag. Sci..

[33]  Yan Ning,et al.  Selecting client's project control strategies in person-to-organization transactions , 2017 .

[34]  D. Hofenk,et al.  The influence of contractual and relational factors on the effectiveness of third party logistics relationships , 2011 .

[35]  David W. Gerbing,et al.  An Updated Paradigm for Scale Development Incorporating Unidimensionality and Its Assessment , 1988 .

[36]  Wenxue Lu,et al.  Effect of Contract Completeness on Contractors’ Opportunistic Behavior and the Moderating Role of Interdependence , 2016 .

[37]  Maggie Chuoyan Dong,et al.  Understanding distributor opportunism in a horizontal network , 2013 .

[38]  Kyle J. Mayer,et al.  Contract design as a firm capability: An integration of learning and transaction cost perspectives , 2007 .

[39]  Pervez N. Ghauri,et al.  Use of the written contract in long-lasting business relationships , 2004 .

[40]  R. Bagozzi,et al.  On the evaluation of structural equation models , 1988 .

[41]  Jan B. Heide,et al.  Opportunism in Interfirm Relationships: Forms, Outcomes, and Solutions , 2000 .

[42]  Yan Ning,et al.  Identifying combinations of control strategies in dwelling fit-out projects: A latent profile analysis , 2017 .

[43]  Kathleen M. Eisenhardt,et al.  Control: Organizational and Economic Approaches , 1985 .

[44]  Mike W. Peng.  Institutional Transitions and Strategic Choices , 2003 .

[45]  Zhilin Yang,et al.  Inter-firm opportunism: a meta-analytic review and assessment of its antecedents and effect on performance , 2013 .

[46]  Phanish Puranam,et al.  Repeated Interactions and Contractual Detail: Identifying the Learning Effect , 2008, Organ. Sci..

[47]  X. Zheng,et al.  Contract ineffectiveness in emerging markets: An institutional theory perspective⋆ , 2016 .

[48]  P. Zou,et al.  Effects of contract strategy on interpersonal relations and project outcomes of public sector construction contracts in Australia , 2015 .

[49]  Sandy D. Jap,et al.  Safeguarding Interorganizational Performance and Continuity Under Ex Post Opportunism , 2003, Manag. Sci..

[50]  K. Zhou,et al.  How foreign firms curtail local supplier opportunism in China: Detailed contracts, centralized control, and relational governance , 2012 .

[51]  K. Zhou,et al.  Exchange hazards, relational reliability, and contracts in China: The contingent role of legal enforceability , 2010 .

[52]  Jan B. Heide,et al.  Interfirm Monitoring, Social Contracts, and Relationship Outcomes , 2007 .

[53]  Steven S. Lui,et al.  The Role of Trust and Contractual Safeguards on Cooperation in Non-equity Alliances , 2004 .

[54]  Marjolein C. J. Caniëls,et al.  The Safeguarding Effect of Governance Mechanisms in Inter-Firm Exchange: The Decisive Role of Mutual Opportunism , 2010 .

[55]  Kyle J. Mayer,et al.  Complementarity and Evolution of Contractual Provisions: An Empirical Study of IT Services Contracts , 2007, Organ. Sci..

[56]  F. Ling,et al.  The effects of project characteristics on adopting relational transaction strategies , 2015 .

[57]  Jan B. Heide,et al.  Controlling Supplier Opportunism in Industrial Relationships , 1996 .

[58]  G. Ziggers,et al.  Dynamics of Cooperation: At the Brink of Irrelevance , 2006 .

[59]  Herman Mooi,et al.  How do contract types and incentives matter to project performance , 2016 .

[60]  Timothy G. Hawkins,et al.  Antecedents and consequences of opportunism in buyer–supplier relations: Research synthesis and new frontiers , 2008 .

[61]  R. Müller,et al.  The impact of principal–agent relationship and contract type on communication between project owner and manager , 2005 .

[62]  C. Fornell,et al.  Evaluating structural equation models with unobservable variables and measurement error. , 1981 .

[63]  D. Malhotra,et al.  Shadow of the contract: how contract structure shapes inter-firm dispute resolution , 2011 .