The Effects Of Risk Allocation On Contractor's Cooperative Behavior In Construction Projects

When designing contracts in practice,project owners often allocate excessive risks to contractors.Even though previous studies have suggested that such improper risk allocation may harm the relationship between the owner and the contractor,and thus lower project performance,few have explicitly investigated the effects of risk allocation on the contractor's cooperative behavior.Our paper fills this gap by empirically exploring whether,how and when risk allocation influences the contractor's cooperative behavior.To do this,we collected data from 346 Chinese project professionals.Before data analysis,we accessed the potential common method bias and internal consistency and reliability of the scales for this study.Then we did the hierarchical regression analysis to test and verify each hypothesis.To test the mediating role of fairness perception on the relationship between risk allocation and cooperative behavior,we adopted bootstrapping mediation test methods.Our results show that pro-owner contractual terms with regard to owner risk allocation and environmental risk allocation negatively affect the contractor's cooperative behavior,pro-owner contractual terms with regard to owner risk allocation and environmental risk allocation negatively affect the contractor's fairness perception,contractor's fairness perception positively affects contractor's cooperative behavior,and the contractor's fairness perception partially mediates such an effect.Moreover,risk premium weakens the effect of environmental risk allocation on the contractor's fairness perception,but not the effect of owner risk allocation on the contractor's fairness perception.Term specificity strengthens the effect of the contractor's fairness perception on the contractor's cooperative behavior.Theoretically,these insights extend risk allocation studies by identifying the underlying mechanism behind the relationship of risk allocation and inter-firm cooperation and thus contribute to sound contractual governance.Practically,our study findings can help project owners design better contracts,particularly by bearing in mind that risk premium should not always be used to restore the contractor's fairness perception to elicit the contractor's cooperative behavior as it does little help when owner risks are allocated to contractors.Generally,the owner should move from a one-sided “win” orientation to “a fair and clear” orientation to achieve a realistic “win” situation in allocating risks.