How do institutional pressures moderate the impacts of relational governance on the performance of international projects? An empirical assessment

Abstract

Relational governance has been considered a major governance strategy to mitigate the increasing contractual hazards in today's complex and volatile markets. In international projects, the effectiveness of relational governance can be much complicated by the host country's institutional environments, especially when trust and relational norms are treated as different types of relational governance. This research aims to study empirically how institutional pressures may affect the effectiveness of trust and relational norms and to form a contingency theory of relational governance. In this paper, an empirical analysis was conducted to test and measure the moderating effects of institutional pressures on the performance impacts of trust and relational norms. The results show that institutional pressures positively moderate the impacts of trust but negatively moderate the impacts of relational norms, indicating that trust and relational norms function and benefit projects differently and should be employed differently contingent on the institutional environments.