The effectiveness of contractual and relational governances in construction projects in China

Based on the transaction cost economics, this article addresses the effectiveness of contractual and relational governances in improving project performance and restricting opportunism in construction. Ten hypotheses are presented. Using data from construction project in China, we adopt Partial Least Squares (PLS) to test and verify our hypothesis. The results show that the contractual and relational governances are important to improve project performance, and these two factors function as complements rather than substitutes. The contractual governance is more effective in improving performance while relational governance is more powerful in restricting opportunism. The opportunism does not have a direct negative impact on project performance.