Understanding the Relationship between Environmental Uncertainty and Transaction Costs in Construction Projects: Moderating Roles of Prior Cooperation Experience and Intragroup Transactions

Abstract

This paper aims to comprehensively analyze the influences of environmental uncertainty (EU) on three dimensions of transaction costs, namely, setup, monitoring, and enforcement costs, in a construction project. More importantly, the paper presents an investigation of the moderating effects of prior cooperation experience (PCE) and intragroup transactions (IGTs) to address how to reduce the transaction costs that arise from EU. Based on data collected from 319 project managers or professionals in the Chinese construction industry, the findings of this research are that EU is positively related to setup, monitoring, and enforcement costs. Further, the results also reveal that PCE can weaken the effects of EU on setup and enforcement costs while having no significant moderating effect on the relationship between EU and monitoring costs. In terms of IGTs, these findings are important for managers attempting to cope with the increasing enforcement costs arising from EU.