Uncertainty, opportunistic behavior, and governance in construction projects: The efficacy of contracts

Abstract

Uncertainty makes exchanges subject to substantial opportunistic behavior that is generally believed to be curbed by the contract. However, how the contract governs the relationship between uncertainty and opportunistic behavior has not been elaborated. This paper examines the effects of uncertainty on the supplier's opportunistic behavior and the moderating effects of contractual complexity. This research classifies uncertainty into environmental uncertainty and behavioral uncertainty and distinguishes contractual complexity from a functional perspective, with elements including control, coordination and adaptation. Using data from 220 owners and general contractors in the Chinese construction industry, this research reveals that a positive relationship exists between uncertainty and opportunistic behavior. Contractual control and adaptation have effects on weakening the relationship between environmental uncertainty and opportunistic behavior, while contractual coordination can mitigate the opportunistic behavior induced by behavioral uncertainty. These findings offer new insights into uncertainty management and a nuanced understanding of contractual governance in projects.