A rational framework on the causes and cures of collaborative projects failure

This paper takes a rational perspective to study the causes and cures of collaborative projects failure in the organizations. It shows that project cooperation failure may result from two causes: project members´ private information (with respect to their preferences and/or outside options) as well as their incentives to misrepresent - explicitly and implicitly - that information; and failure to build trust. Different from the prior studies, which often attribute project failure to poor skills of project management (e.g., miscommunication, trust building, etc), this study shows that in collaborative projects, it is the structural conflicts among project stakeholders that handicap the communication and trust building. In addition, this paper also examines two mechanisms of self-enforcement and their effects on cooperation. First, when the costs of implicit communication are strongly asymmetric, one party may have the incentive to signal her private information in a way that goes beyond “cheap talk”. Second, if the project payoff is fixed for one party but potentially higher for the other party, the risk of cooperation failure actually increases because the latter party then bargains more aggressively.