Understanding the Relationship between Asset Specificity and Governance Choices in Construction Projects: Moderating Role of Uncertainty

Abstract

In previous research, it has been debated whether uncertainty moderates the relationship between asset specificity and governance mechanisms. The relationship between the owner and contractor is a typical interorganizational collaborative relationship, with contractual and relational governance as key mechanisms. Based on transaction cost theory and relational exchange theory, this paper establishes a competitive conceptual model of construction project transaction characteristics on contractual and relational governance to test the moderating role of uncertainty in interorganizational relationships. The questionnaire data were analyzed with partial least-squares structural equation modeling (PLS-SEM) to verify the theoretical hypotheses. This paper finds that there is a significant positive correlation between asset specificity and both contractual governance and relationship governance, with uncertainty as a moderator significantly enhancing the correlation between asset specificity and relational governance. The conclusions of this paper support the predictions of relational exchange theory and transaction cost theory. The findings enhance the understanding of project governance mechanisms and interorganizational collaborative relationships. Faced with high uncertainty, the owner and contractor are advised to adopt relational norms such as trust rather than designing more formal contractual terms to resolve conflicts caused by asset specificity.