A Study On The Influence Of Contractual Incentive And Trust On Contractor's Cooperative Behaviors

Cooperation between the owner and contractor is crucial for the success of construction projects. However, it is not an easy task to achieve efficient cooperation mainly due to the intrinsic complexity, uncertainty, and asset specificity of projects, which could trigger contractor's opportunistic behaviors. To promote cooperation, this thesis classified cooperative behaviors into task behaviors and relational behaviors mainly drawing on the behavioral motivation theory, and then investigated the influence of explicit contractual incentive and implicit trust on contractor's task behaviors and relational behaviors.Based on the principal-agent theory, a three-staged Stackelberg model was established and then solved by backward induction to investigate varied effects of contractual incentive and trust on the contractor's different types of cooperative behaviors, to identify affecting factors of the optimal contractual incentive coefficient, and to figure out if there is any boundary condition for the complementation of contractual incentive and trust. To be specific, research results indicate that contractual incentive can directly motivate contractor's task behaviors, while the relationship between trust and contractor's relational behaviors is positively moderated by the owner's relational behaviors, which is path dependent. The more effort the owner devoted on relational behaviors, the better trust can play its role in promoting cooperation.Furthermore, this thesis obtained two decision equilibriums for the owner and contractor at each stage and then identified three different levels of factors affecting the optimal contractual incentive coefficient by conducting comparative static analysis. The intra-organizational factors at the first level include the contractor's comprehensive strength, absolute risk-aversion coefficient, marginal changing rate of cost-of-effort, and the owner's level of effort on relational behaviors. Trust at the inter-organizational level is positively related with the optimal contractual incentive coefficient. However, a higher level of project complicity and uncertainty at the project level matches a lower level of the optimal contractual incentive coefficient.Moreover, this thesis finally identified a boundary condition for the complementation between contractual incentive and trust within our framework of analysis. When the changing rate of the owner's cost of effort is less than or equal to a threshold, contractual incentive and trust can be complementary, otherwise no interactions.This thesis took both contractual incentive and trust into consideration and identified their varied effects on the contractor's task behaviors and relational behaviors, which could provide more nuanced insights into the governance mechanism of construction projects. For the managerial implications, this thesis can help the owner select appropriate contractual incentive strength according to organization, project and environmental factors. Moreover, the identification of the boundary conditions can help to create favorable circumstances for the complementation between contractual incentive and trust, promoting efficient cooperation and achieving a better project outcome and relational benefit.