Impact of Regulatory Focus on Choice of Project-Governance Modes: Role of Tolerance of Opportunistic Behavior

Abstract

Trust and formal control are two typical project governance modes used to manage contractor opportunistic behavior in owner-contractor relationships for construction projects. However, the question of what affects the owner’s choice of the two project governance modes remains unclear. This study applies regulatory focus theory to describe owner motivation orientation and tolerance of opportunistic behavior to represent the owner’s attitude to the contractor’s opportunistic behavior. In doing so, it reveals the role of owners’ regulatory focus and their tolerance of contractor opportunistic behavior on their choices between trust and formal control. The questionnaire data were analyzed with partial-least squares structural equation modeling (PLS-SEM) to verify the theoretical hypotheses. The results show that owners’ tolerance of opportunistic behavior can affect their choices between trust and formal control. That is, the higher the tolerance level of contractor opportunistic behavior, the more likely the owner will choose trust to relieve contractor opportunistic behavior, conversely, an owner with a lower tolerance level of contractor opportunistic behavior exhibits a stronger propensity to use formal control. In addition, the promotion focus of owners can increase their tolerance levels of contractor opportunistic behavior, but their prevention focus does not have a significant effect on such a tolerance level. This study contributes to the body of knowledge by empirically confirming that owners’ inherent characteristics (motivation orientations and attitudes) play a significant role in predicting their choices of different project governance modes. The findings can help owners to understand their own motivation orientations and preference concerning project governance modes as well as those of contractors so as to wisely and rationally use the governance modes under various circumstances.