Transaction costs of subcontracting are considered hidden costs due to unobservability and immeasurability, which potentially jeopardize project performance. This study develops a framework of transaction costs in construction projects [i.e., prevention-oriented costs (monitoring costs and coordination costs) and rectification-oriented costs (renegotiation costs)]. Furthermore, this study explores the impacts of the subcontractor dispersion on transaction costs and also provided a holistic view of the relationships by investigating the contingent role of different attributes, including project, relational, and institutional attributes. Using empirical evidence obtained from 283 professionals employed by Chinese general contractors, this study finds that a higher level of the subcontractor dispersion leads to more coordination and monitoring costs but fewer renegotiation costs. In addition, the contingent effects of different attributes proffer insights into the underlying mechanisms of how different transaction costs rise in a subcontracting relationship. Coordination costs occur due to information processing requirements, monitoring costs rise from the worry of shrinking, and renegotiation costs come from the relative power between parties. This study highlights the subcontractor dispersion as an important component of the subcontracting arrangement that has been long ignored and reveals the potential trade-off between different types of costs when determining the distribution of subcontracted work among subcontractors. Besides, the moderation analyses demonstrate different features and sources of each type of transaction costs, confirming the significance of the framework both theoretically and empirically. This study reminds project managers of the hidden costs that are frequently underestimated and the contingency analyses help them recognize effective domains for different subcontracting arrangements.
The subcontracting organizational arrangement has received limited attention in designing the control mechanism. This study has explored how managerial controls affect opportunistic behaviour and developed a contingency framework to investigate the moderating effect of subcontracting dispersion. By using survey data from 323 general contractors in the Chinese construction industry, this study reveals that both outcome control and clan control curb the occurrence of subcontractors' opportunistic behaviours while behaviour control scarcely helps. Besides, subcontractor dispersion distinctively moderates these relationships. A high level of subcontractor dispersion amplifies the opportunism-curbing effect of outcome control, but attenuates that of clan control, which leads to more opportunistic behaviours. Only at a lower level of subcontractor dispersion will behaviour control mitigate subcontractors' opportunistic behaviours. Our configurational analyses reveal the substitute and complementary relationship between different control modes with different levels of subcontracting dispersion. This study contributes to the literature on governing opportunism and managerial control. The findings guide managers of the general contractor to exploit appropriate managerial controls to curb opportunistic behaviours across different organizational designs.
Contract violations are frequent due to the high uncertainty and complexity of construction projects. However, enforcement after a violation has received limited attention. This study distinguishes between three types of violations, i.e., letter violations, mutually agreed spirit violations, and unilaterally assumed spirit violations, based on the documentation and mutuality dimensions. By using the data collected from Chinese general contractors, this study concludes that compared with unilaterally assumed spirit violations, violations of high mutuality of obligations (the first two violations) will lead to more severe contractual and reputational enforcement while with high mutuality, whether the violated obligations are written in the contract or not (corresponding to the first two violations, respectively) does not significantly affect the severity of enforcement. The mediating effects of relational risk perception on the aforementioned effects are empirically supported. This study contributes to the enforcement literature by exploring the effects of the characteristics of violations, especially violations of undocumented elements of contracts, on enforcement and fills the gaps in the scarce literature on reputational enforcement and its antecedents. Project managers can benefit from this study by recognizing the application of reputational enforcement and making better alignment between different types of violations and enforcement.
The organizational design of subcontracting in the construction industry has received limited attention. This article integrates transaction cost economics and resource-based view to investigate how the governance capabilities of the general contractor impact the organizational arrangement of subcontracting and how the goal orientation of project moderates these relationships. Regression analyses were conducted on information collected by a questionnaire survey administered to a sample of 279 respondents who were employed by Chinese general contractors and who were privy to strategy information in construction projects. The results showes that the general contractor with strong governance capabilities tends to increase the extent of the work to be subcontracted and the dispersion of subcontractors used in projects. Moreover, these relationships change when the goal orientation in projects differs. In projects that display an exploitative goal orientation, the positive impact of governance capabilities on the extent of subcontracting will be weakened while the impact on subcontractor dispersion will be strengthened. In contrast, the relationship between governance capabilities and the extent of subcontracting will be stronger, and the relationship between governance capabilities and the subcontractor dispersion will be weaker in projects that exhibit an explorative goal orientation. The findings contribute to the subcontracting literature by distinguishing between the extent of subcontracting and subcontractor dispersion and by highlighting the importance of the general contractor's governance capabilities and project goal orientation when setting up a subcontracting arrangement.
The emergence of large language models (LLMs) presents an unprecedented opportunity to automate construction contract management, reducing human errors and saving significant time and costs. However, LLMs may produce convincing yet inaccurate and misleading content due to a lack of domain expertise. To address this issue, expert-driven contract knowledge can be represented in a structured manner to constrain the automatic contract management process. This paper introduces the Nested Contract Knowledge Graph (NCKG), a knowledge representation approach that captures the complexity of contract knowledge using a nested structure. It includes a nested knowledge representation framework, a NCKG ontology built on the framework, and an implementation method. Furthermore, we present the LLM-assisted contract review pipeline enhanced with external knowledge in NCKG. Our pipeline achieves a promising performance in contract risk reviewing, shedding light on the combination of LLM and KG towards more reliable and interpretable contract management.
'/%3e%3cuse xlink:href='%23a' transform='rotate(23.036 .093 25.536)'/%3e%3cuse xlink:href='%23a' transform='rotate(45.87 1.273 16.18)'/%3e%3cuse xlink:href='%23a' transform='rotate(69.945 .996 12.078)'/%3e%3cuse xlink:href='%23a' transform='rotate(20.66 -19.689 31.932)'/%3e%3c/svg%3e)
'/%3e%3cuse xlink:href='%23a' transform='rotate(144 450 300)'/%3e%3cuse xlink:href='%23a' transform='rotate(216 450 300)'/%3e%3cuse xlink:href='%23a' transform='rotate(288 450 300)'/%3e%3c/svg%3e)
