Owners’ use of contract-based power in construction project transactions: restrictions from process specificity and uncertainty

Rui Wang, Wenxue Lu and Yuxin Wei

Construction Management and Economics, 2021, vol. 39, issue 2, 117-132

Abstract: Little is known about what restrictions make owners unable to use or give up using contract-based power in construction project transactions. To examine this issue, this research explores the effects of process specificity on owners’ contract design and power use during contract execution as well as the moderating role of uncertainty in these effects using empirical data from 327 construction project transactions in China. The results show that owners can use coercive and legitimate powers based on contractual control while using reward and legitimate powers based on contractual coordination. The increase in process specificity (a special version of asset specificity in construction project transactions) encourages owners to intensify ex ante contract design while restricting their ex post coercive power use based on contractual control. Behavioural uncertainty weakens owners’ tendency to intensify contractual control with increasing process specificity, restricting their contractual-control-based power use. However, task uncertainty strengthens (rather than restricts) owners’ tendency to intensify contract design and power use when process specificity increases. These findings can help practitioners understand how the attributes of construction project transactions are related to transaction costs to affect owners’ contract-based power use, thereby avoiding ineffective power use.

Date: 2021
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DOI: 10.1080/01446193.2020.1830423

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