How does contractual governance affect construction project performance? The mediating role of the contractor’s behavior

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ABSTRACT The contractor’s performance behavior is fundamental in improving project performance. However, few studies have investigated the impact of contractual mechanisms on contractor’s performance behavior and how this impacts project performance. Therefore, this study developed and tested a theoretical model to examine the mediating role of contractor’s performance behavior between risk allocation(contractual governance) and project performance. A total of 208 valid questionnaires collected from project managers in the Chinese construction industry were analyzed by partial least squares structural equation modeling (PLS-SEM) to test the theoretical hypotheses. The empirical results show that proper risk allocation can induce both contractors’ perfunctory and consummate behavior and restrict opportunistic behavior, thus achieving basic project performance. Although the mediating effect of perfunctory behavior is insignificant, consummate and opportunistic behavior can mediate between proper risk allocation and value-added project performance, where the mediating role of consummate behavior is more critical. The findings contribute to the impact of contractual mechanisms on the construction project performance and guide the owner’s contract design strategy and the contractor’s choice of performance strategy.