Empirical behavioral analysis of project contractors' supply‐chain payment terms

Abstract

PurposeResearchers in supply chain (SC) payment management have long sought to understand how project contractors, project owners, specialist contractors, and suppliers behave in the context of negotiating payment terms that improve contractors' SC cash flow.Design/methodology/approachUsing a single case study approach, semi‐structured interviews with contract and project managers identify behavioral patterns. An analysis of categorical experiments and Spearman's correlation tests on 118 surveys from Taiwanese project contracting corporations generalizes the case findings.FindingsThe findings suggest that payment terms of project owners, specialists, and suppliers have an important impact on contractors' working capital. The findings also reveal that contractors pass project owners' payment terms down to specialists and suppliers, suggesting that contractors' behavior depends on that of the project owners.Research limitations/implicationsThis paper generalizes the case findings via surveys, but does not assume that the reported behavior patterns apply to all business enterprises. Future research could triangulate the findings.Originality/valueThis study combines qualitative and quantitative methods to understand how the project owner‐contractor‐supplier (or owner‐contractor‐specialist) triad behaves. Particularly, it focuses on an economic sector – real estate and construction – that receives less research interest than processing or manufacturing.