Asset Specificity and Contractors’ Opportunistic Behavior: Moderating Roles of Contract and Trust

Abstract

In construction projects, contractors often engage in opportunistic behavior. This research aims to examine the effect of asset specificity on contractors’ opportunistic behavior (strong form and weak form), including exploring and comparing the governance effectiveness of contract and trust. The empirical results from a survey of 228 Chinese owners reveal that asset specificity has positive effects on contractors’ strong and weak form opportunistic behavior, and the effect on weak form opportunistic behavior is stronger. The results further show that the impact of asset specificity on opportunistic behavior (strong form and weak form) reduces as contractual complexity increases. The effect of asset specificity on weak form opportunistic behavior decreases as trust strengthens. Accordingly, the findings manifest that effectiveness of contract was more prominent when moderating the relationship between asset specificity and strong form opportunistic behavior. These findings provide a nuanced and advanced understanding of whether complex contracts or high levels of trust are the more effective choices for governing opportunistic behavior and offer managerial suggestions for the parties involved in construction projects.