The Opportunism-Inhibiting Effects of the Alignment Between Engineering Project Characteristics and Contractual Governance: Paired Data From Contract Text Mining and Survey

Abstract

Engineering projects are vulnerable to opportunistic behavior due to their one-off and uncertain nature. Contractual governance is the crucial mechanism for matching the two key project characteristics, i.e., asset specificity and uncertainty, to curtail opportunism. However, the existing studies failed to agree on the above matching principle. In this article, we divide contractual governance into control, coordination, and adaptation from the functional perspective and employ machine learning to code actual contract texts. Based on the paired data from the text-mining results and survey, this study uses qualitative comparative analysis to investigate the aligning (or misaligning) combinations that lead to low (or high) opportunism. The results show that, for projects with low uncertainty, detailed contractual coordination is essential and it should be complemented by less detailed adaptation or detailed control. In such projects, low asset specificity reinforces the significance of contractual coordination alone. This study also finds the limitations of contractual governance in projects with high uncertainty, especially combined with low asset specificity, which necessitates other governance mechanisms. This study helps to resolve previous contradictory matching principles from the view of contract dimensions, contract measurement, and data analysis methods. Project managers can benefit from this study to effectively reduce opportunism and avoid disputes.