Complements or substitutes? Recipes of contract design, contract enforcement, and trust for enhanced project performance

Abstract

The interplay of contractual and relational governance has shown inconclusive effects on project performance, resulting in the complements versus substitutes debate. Adding nuance to this debate, this study takes a configurational perspective and examines their combined effects by conceptualizing contractual governance as design (control, coordination, and adaptation functions) and enforcement, and relational governance as trust. A qualitative comparative analysis of survey data collected from international construction projects undertaken by Chinese contractors reveals multiple pathways for high or low project performance. Contractual coordination and trust are the most critical factors, with their synergistic application proving beneficial regardless of other conditions. Although contractual governance alone can ensure high performance, trust must operate in tandem with contract-based mechanisms. Strict contract enforcement without sufficient trust results in poor performance. By connecting the transaction cost theory and social exchange theory, this study deepens the understanding of interrelations between project governance mechanisms and enhances project performance.