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Trust or fairness is more important:research on the mechanism of contract risk allocation inducing contractor to consummate performance behavior

Trust or fairness is more important:research on the mechanism of contract risk allocation... JOURNAL OF ASIAN ARCHITECTURE AND BUILDING ENGINEERING https://doi.org/10.1080/13467581.2023.2172323 CONSTRUCTION MANAGEMENT Trust or fairness is more important:research on the mechanism of contract risk allocation inducing contractor to consummate performance behavior a,b a a Qing Lin , Ling Yan and Yilin Yin a b School of Management, Tianjin University of Technology, Tianjin, China; Zonleon Construction Consulting Co., Ltd, Guangzhou, China ABSTRACT ARTICLE HISTORY Received 22 May 2021 Contractor’s consummate performance behavior (CPB) is the key to achieve consummate Accepted 19 January 2023 performance. However, the mechanism of reasonable contract risk allocation incentives for Contractor’s CPB is unknown. The objective of this study is to reveal the effective ways to KEYWORDS encourage contractor’s CPB by contract risk allocation based on the contract reference point Risk allocation; consummate theory and selecting the contractor’s trust perception and fair perception as mediating vari- performance behavior (CPB); ables. Through an empirical analysis of the valid questionnaires collected, the results are as trust perception; fair follows: (1) Although the economic benefits generated by reasonable contract risk allocation perception can induce contractor’s fair perception, fair perception has no mediating effect in the relation- ship between contract risk allocation and contractor’s CPB; (2) The cooperative value generated by reasonable contract risk allocation can induce contractor’s trust perception, and trust perception plays a part mediating role between contract risk allocation and contractor’s CPB. The findings also provide insights into how risk allocation facilitates contractor’s CPB in the construction industry. 1. Introduction behavior (Yan and Guo 2020). However, there is no research on how to induce contractors to perform CPB As one of the most important subjects of construction project implementation, the contractor’s performance from the perspective of clients. behavior is very important to the realization of project In construction projects, a lot of scholars believe that a reasonable contract risk allocation scheme is performance (Memon et al. 2021; Li, Yin, and Zhang 2020; Skitmore et al. 2020). The contract reference the main incentive mechanism to induce contractor’s point theory proposed by Hart and Moore divides pro- cooperative behavior and improve project perfor- mance (Memon et al. 2021; Zhang et al. 2016; ject performance into perfunctory performance (PP) and consummate performance (CP) and points out that CP is Nguyen, Rameezdeen, and Chileshe et al. 2021; the basis of project benefit sharing (Hart and Moore Peckiene, Komarovska, and Ustinovicius 2013). 2008). On this basis, scholars such as Liu et al. (Liu However, some studies have shown that reasonable et al. 2019) and Yan et al. (Ling, Zhixiu, and Jiaojiao risk allocation does not necessarily bring positive 2018) further divide the performance behaviors into behaviors of contractors. On the contrary, reasonable perfunctory performance behavior, consummate per- risk allocation clauses designed in contract may be used by contractors, resulting in a large number of formance behavior (CPB), and opportunistic behavior according to the different performance efficiency of opportunistic behaviors and reducing project perfor- contractor, and point out that CPB plays a key role in mance (Lu et al. 2015; Zhichao et al. 2018). It can be seen that a reasonable risk allocation scheme designed the smooth implementation of project and even the improvement of project performance, which is the by the client in the contract does not necessarily moti- core concern of client. CPB exists objectively, but it is vate the contractor to perform CPB, but also needs to consider the intermediary conditions that can trigger difficult to be confirmed by a third party (Hart and Moore 2008), which cannot be enforced by law, and contractor’s CPB. Some studies have shown that beha- must be based on the voluntary provision of partners viors of contracting parties are not entirely interest- (Williamson 1975). Yan et al. reveal the driving factors oriented but also influenced by social preference and formation mechanism of contractor’s CPB from the (Zhou et al. 2012). The signals of trust and fairness perspectives of behavior attitude, subjective norm, and conveyed by the reasonable risk allocation mechanism perceived behavior control (Ling, Liang, and Yan 2020), itself will stimulate the social preference of contractor, and thus induce contractor’s positive behaviors (Kraft, and establish the theoretical framework of contractor’s CPB from the perspective of contractor’s internal Valdés, and Zheng 2017). CONTACT Ling Yan 444392566@qq.com; 173103402@stud.tjut.edu.cn School of Management, Tianjin University of Technology, Tianjin 300384, China © 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group on behalf of the Architectural Institute of Japan, Architectural Institute of Korea and Architectural Society of China. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. 2 Q. LIN ET AL. In summary, there is no clear theoretical model to and has the ability to control at an appropriate time reveal the relationship between risk allocation and and getting certain economic compensation for risk- CPB. To fill this gap, this study aims to explore the bearing (Barnes 1983; Koh, Ahmed, and Kayis et al. mechanism that risk allocation triggers contractor’s 2007). Based on incomplete contract theory, Yin et al. CPB, based on a formal theoretical linkage model and construct a risk allocation framework for the contract- a statistical empirical investigation. To further explore ing stage of construction projects, suggesting that the how and when this mechanism occurs, trust and fair measurement dimensions of initial risk allocation perception are introduced as mediating variables, include completeness, enforceability, and incentive which is helpful to better understand the potential (Yilin, Dong, and Yao 2015). According to the sources, mechanism of risk allocation inducing contractor’s Zhang et al. put the project risks divide into environ- CPB. The study collected a total of 164 valid question- mental risks and behavioral risks. The reasonable risks naires by issuing questionnaires. The reliability and allocation should be that the behavior risks are borne validity of the collected data have been tested by by the subject of the behavior, and the environmental SPSS Statistics21.0, and then the hypotheses were risks are shared by both contracting parties (Zhang tested by Smart PLS3.0 of SEM-PLS. The research et al. 2016). Based on the contract reference point results will provide new insights for the contract refer- theory, Yan et al. have confirmed that the contract ence point theory and provide theoretical basis for risk allocation mechanism can be further subdivided designing contract clauses that effectively encourage into two dimensions: risk liability and risk compensa- contractor’s CPB. tion (Yan Ling, Liu Liu, Zeng Cheng 2019). The core of The remainder of this paper is organized as follows: risk liability lies in clarifying the situation or result of Section 2 introduces the literature review. Section 3 the risk undertaken by both parties; Risk compensation presents the conceptual framework and hypothesis emphasizes that the contract price signed by both development. Section 4 presents the method. parties is fair compared with the risk that contractor Section 5 reports the results and discussion. It ends should bear. up with implications for theory and practice as well as concluding remarks. The overall scope and procedure of this study is shown in Figure 1. 2.2. Contractor’s Consummate Performance Behavior (CPB) 2. Literature review Previous studies on contractor’s behavior mainly focus on two aspects. One is based on transaction cost the- 2.1. Contract risk allocation ory, focusing on restraining opportunistic behavior Risk allocation is the key issue of construction project and promoting cooperative behavior of contractors contract governance, and it is also a hot research topic (Lu et al. 2015; Ahimbisibwe 2014). In this perspective, in academic and practical circles (Zhichao et al. 2018; researchers pay more attention to contractor’s in-role Tsai and Yang 2009; Cha and Shin 2011; Zhang et al. behavior but are less concerned about the extra-role 2021). Reasonable risk allocation refers to the alloca- behavior that cannot be written in the contract and tion of risks to the party who voluntarily undertakes has a positive effect on construction project (Memon Backgroud Objective Methodlogy 1.Review is conducted about risk 1.Contractor’s CPB is the key to The objective of this allocation, CPB, trust perception and achieve consummate performance, study is to reveal the and contract risk allocation is an fair perception based on contract effective ways to reference point theory. important factor affecting encourage the 2.Through literature review, the contractor’s behaviors. contractor's CPB by 2.However, the mechanism of contract research hypothesis and conceptual contract risk framework are developed. risk allocation incentives for allocation. 3.With data collected and analyzed, the contractor’s CPB is unknown . conceptual frameworkis tested. Literature review Conceptual framework development Conclusion 1.This study developeda conceptual framework which revealsthe Questionnaire design and data collection mechanism that contract risk allocation triggers contractor's CPB. 2.Contract reasonable risk compensation can promote contractor's Reliability and validity analysis CPB, however, risk liability is not obvious. 3.Trust perception plays a part mediating role between contract risk Conceptual frame work testing allocation and contractor's CPB, but fair perception has no mediating effect. Discussion and conclusion Figure 1. The research scope and procedure. JOURNAL OF ASIAN ARCHITECTURE AND BUILDING ENGINEERING 3 et al. 2021; Li et al. 2019). The second perspective As an academic term, fair perception focuses on the focuses on the organizational citizenship behavior of fair feelings of individuals with fair preference for contractors based on organizational behavior theory. giving and feedback (Liu et al. 2012). The formation Contractor’s organizational citizenship behavior has of contractor’s fair preference depends on the com- a positive effect on construction projects (Lim and parison between the results obtained and its con- Loosemore 2017; Wang et al. 2018), but belonging to tract reference points (Yan Ling, Liu Liu, Zeng individual level, not organizational level. Cheng 2019). The academic research on fair percep- Different from the two aspects above, based on the tion mainly focuses on supply chain, income distri- contract reference point theory, the initial contract bution, and other fields and their measures from concluded by the construction project participants three dimensions: distribution fairness, procedural provides a reference point for the parties’ trading rela- fairness, and interactive fairness (Luo 2007; Baird, tionship through the feelings of entitlement. Parties Su, and Nuhu 2021). Based on the characteristics might choose corresponding performance behavior of construction projects, Du et al. divide contractor’s based on their sense of entitlement (Hart and Moore fair perception into two dimensions: distribution 2008; Fehr, Hart, and Zehnder 2011). The choice of fairness and procedural fairness (Yaling, Huiling, contractor’s behavior strategy is affected by the con- and Hong 2016). tract reference point. That is, when the contractor feels that he has obtained the rights and interests stipulated in the contract, he will perform CPB. Otherwise, con- 3. Conceptual framework and hypotheses tractors are only willing to implement contracts development according to the minimum standards, or even retalia- 3.1. Contract risk allocation and contractor’s CPB tory opportunism (Ling, Liang, and Yan 2020). With reference to the definition of extra-role behavior and Risk allocation mechanism is the most important organizational citizenship behavior, this study defines mechanism in contract governance. A reasonable contractor’s CPB as the inter-organizational perfor- risk allocation mechanism should not only emphasize mance behavior (Wang et al. 2018) that contractor is reasonable risk liability, that is, too many risks can not willing to make extra efforts to implement the project be transferred to contractor, but also pay attention to in the spirit of contract, which is characterized by the rationality of risk compensation, that is, contrac- voluntary, initiative, and altruism (Yan and Guo 2020). tor can get matching compensation for the risks he bears (Yan Ling, Liu Liu, Zeng Cheng 2019). In fact, the two dimensions of risk allocation not only reflect 2.3. Trust perception client’s economic incentives to contractor but also Trust refers to an individual’s willingness to believe reflect client’s consideration of interests of contractor that the other party will be mutually beneficial in and his friendly tendency to contractor (Meng 2012). certain risk activities. Trust originates from communi- There is no doubt that risk allocation is closely related cation and is an embodiment of interpersonal rela- to contractor’s income. Risk allocation reflecting effi - tionships (Qin, Hua, and Tang 2010). It is also an ciency and fairness can induce contractors to respond effective tool for managing organizational relation- positively to the expectation of client, taking recipro- ships (Wu et al. 2020). Trust has reciprocity, which is cal CPB (Yilin, Dong, and Yao 2015; Klotz and Bolino a kind of interactive relationship. It is the motivated 2013). Branconi points out that a reasonable risk altruistic behavior that people take the initiative to allocation mechanism can coordinate the relevant others based on the expectation of reciprocal positive relations among all parties involved in a project and reciprocal behavior of others. In other words, the guides them to make decisions in good faith (Von expectation of trusting others is the positive recipro- Branconi and Loch 2004). On the contrary, if a client cal behavior of winning others’ subsequent repay- adopts an unreasonable risk allocation, the risks faced ment (Chan and Au 2008). In this study, trust by the contractor will exceed his scope of commit- perception refers to contractor’s perception of the ment, so that the contractor may choose opportunis- trust and goodwill signal transmitted by client’s rea- tic behaviors, such as lowering the quality of the sonable risk allocation. Some studies have proved project or claiming for a higher price (Pang et al. that reasonable risk allocation is a necessary condi- 2015). Thus the following are hypothesized: tion for contractors to generate trust perception (Pei, Hypothesis 1 (H1): Risk allocation is positively Guo-jie, and Yin-li 2015). related to contractor’s CPB. Hypothesis 1a (H1a): The more reasonable the risk liability, the more likely contractor will engage in CPB. 2.4. Fair perception Hypothesis 1b (H1b): The more reasonable the risk Fairness means that ”a decision, outcome, or proce- compensation, the more likely contractor will engage dure is both balanced and correct” (Pan et al. 2017). in CPB. 4 Q. LIN ET AL. can be inferred that the trust interaction between 3.2. The mediating role of contractor’s trust contractor and client is probably the key mediating perception variable between risk allocation of client and contrac- Contractor’s trust perception is a kind of expectation or tor’s CPB. According to this, combining with hypoth- evaluation of client’s ability to provide beneficial beha- esis 1 and hypothesis 2, the following hypothesises are viors based on client’s positive intentions and wishes proposed: under the uncertainty and risks (Mayer, Davis, and Hypothesis 3 (H3): Contractor’s trust perception Schoorman 1995). If one party takes the risk, the plays a mediating role between risk allocation and other party will regard behaviors as a kind of trust contractor’s CPB. and make a positive return (Lester and Brower 2003). Hypothesis a (H3a): Contractor’s trust perception Reasonable risk allocation is the result of modification plays a mediating role between risk liability and con- and re-modification of risk allocation strategy formed tractor’s CPB. by client on the basis of mutual benefit and win–win Hypothesis 3b (H3b): Contractor’s trust perception consideration (Lau and Lam 2008), which conveys the plays a mediating role between risk compensation and signal and willingness of client to trust contractor and contractor’s CPB. actively cooperate (Zhichao et al. 2018). Reasonable risk liability and compensation clauses in the contract grant the contractor more control over the project and 3.3. The mediating role of contractor’s fair stimulate his trust perception in the client (Seibert, perception Silver, and Randolph 2004). Furthermore, contractors will have a sense of respect, deeply awaken his aware- Franke et al. find that income distribution will affect ness of trust in clients, and devote more energy and participants’ fair perception (Franke, Keinz, and capital to maintain the cooperative relationship with Klausberger 2013). Risk allocation is the most impor- client (Pierce and Gardner 2004). Thus, the following tant income distribution measure in construction pro- are hypothesized: jects (Peckiene, Komarovska, and Ustinovicius 2013). Hypothesis 2 (H2): Reasonable risk allocation can Reasonable division of risk liability is the basis of coop- enhance contractor’s trust perception eration between the contracting parties. The essence Hypothesis 2a (H2a): The more reasonable the risk of contracting and performance process of construc- liability, the stronger contractor’s trust perception. tion contract is the game process between the con- Hypothesis 2b (H2b): The more reasonable the risk tracting parties. It is usually close to the optimal state compensation, the stronger contractor’s trust to establish a division interval of risk liability that both perception. parties can bear (Yilin, Dong, and Yao 2015). The economic incentive of risk allocation will bring Contractors have an expectation of their own risk lia- better performance from those who are motivated, bility scope in advance and set an acceptable range. If which is widely accepted in economic reasoning. the income generated from the risk allocation of the However, the difference in understanding of reason- contract is in this expected range, contractor will feel able risk allocation between client and contractor that it is fair; once this interval is exceeded, contractor often leads to partial failure of the incentive function will feel that he has exceeded his acceptance thresh- for reasonable risk allocation. Therefore, if a client old, and the sense of unfairness will be significantly wants to motivate contractor’s CPB, it needs to pro- increased. Compensation symbolizes a kind of recipro- mote contractor’s recognition of a reasonable risk allo- city of benefits and responsibilities and is contractor’s cation scheme and perceive the positive signal sent by psychological expectation of risks and benefits. the client (Abednego and Ogunlana 2006). Contracts Reasonable risk compensation implies the existence will change contractor’s cognitive style, and contrac- of fairness (Yan Ling, Liu Liu, Zeng Cheng 2019). For tor’s behavior according to the terms in contract may example, Lehtiranta points out the impact of risk liabi- be a comprehensive response to risk liability and com- lity clauses in contract on contractor’s fair perception pensation. For contractors, reasonable risk allocation (Lehtiranta 2014). Aibinu’s study focuses on the impact bears a positive signal that clients trust contractors of contract risk compensation clauses on contractor’s (Mayer, Davis, and Schoorman 1995). A large number fair perception in the process of claim processing of construction practices show that when client (Aibinu, Ling, and Ofori 2011). Therefore, the following chooses a reasonable contract risk allocation scheme, are hypothesized: contractor feels the goodwill and trust signal of client, Hypothesis 4 (H4): Reasonable risk allocation can thinks that active performance can get due reward and enhance contractor’s fair perception. compensation, and actively performs obligations Hypothesis 4a (H4a): The more reasonable the risk under trust perception (Zhichao et al. 2018), and even liability, the stronger contractor’s fair perception. adopts organizational citizenship behavior that is more Hypothesis 4b (H4b): The more reasonable the risk beneficial to client (Serva, Fuller, and Mayer 2010). It compensation, the stronger contractor’s fair perception. JOURNAL OF ASIAN ARCHITECTURE AND BUILDING ENGINEERING 5 Fair perception is an important behavioral induce- Hypothesis 5a (H5a): Fair perception plays a mediating ment variable, which is an individual’s subjective judg- role between risk liability and contractor’s CPB. ment of whether his effort is consistent with his reward Hypothesis 5b (H5b): Fair perception plays (Ling, Yi-fan, and Yu-wei 2018). In construction pro- a mediating role between risk compensation and con- jects, a reasonable compensation mechanism can tractor’s CPB. effectively enhance contractor’s fair perception and The above-mentioned series of hypotheses devel- induce his CPB (Yan Ling, Liu Liu, Zeng Cheng 2019). opment discuss the relationship between risk alloca- In the research of fair perception inducing the behavior tion as an independent variable and contractor’s CPB of all parties in a transaction, Liu et al. (Liu et al. 2012) as a dependent variable and choose trust and fair have proven that fair perception is the key factor to perception as mediating variables to study the direct enhance the cooperation effect from the construction and indirect paths of risk allocation affecting contrac- project organization composed of multiple partici- tor’s CPB. The conceptual framework of this study is pants and that fair perception can also strengthen shown in Figure 2. the positive influence of trust and communication on cooperation. At the same time, fair perception can 4. Methods inhibit opportunistic behavior and reduce manage- ment costs (Baird, Su, and Nuhu 2021). In construction 4.1. Sampling and procedure project, if a contractor thinks that the transaction is fair, The respondents were drawn from clients’ and con- he may take active extra-role actions, such as actively tractors’ project managers or contract managers, from improving the level of efforts, optimizing the design, different construction projects in Beijing, Tianjin, and making up for contract loopholes (Ling, Liang, and Anhui, Guangxi, Jiangsu, Guangdong, Shandong, and Yan 2020). Through interviews and questionnaires with other regions. The questionnaires were collected by 41 experienced contractors in Singapore, Aibinu et al. mail and on-site interviews. A total of 212 question- find that fair perception will affect contractor’s work naires were distributed from March to June 2020, and attitude and behavior in the process of processing 164 valid questionnaires were received, with an effec - engineering claims (Aibinu, Ling, and Ofori 2011). If tive response rate of 77.36%. See Table 1 for the char- a contractor feels a strong sense of unfairness, he will acteristics of interviewees and their items. likely engage in opportunistic behavior, leading to contract disputes between client and contractor, resulting in a decrease in the efficiency of contract 4.2. Questionnaire design performance afterwards (Yan Ling, Liu Liu, Zeng Cheng 2019). Obviously, fair perception becomes the In the conceptual framework, the independent vari- key factor to induce the project participants to actively able is the measurement of two dimensions of risk perform their duties. Improving contractor’s fair per- allocation, and the mediating variables are the mea- ception can effectively reduce disputes and promote surement of contractor’s trust perception and fair per- cooperation. ception. The dependent variable is the measurement Therefore, in combination with hypothesis 1 and of contractor’s CPB. The details are as follows: (1) Risk hypothesis 4, this study put forward the following distribution and risk compensation were integrated hypotheses: the studies of Zhang (Zhang et al. 2016), (Yan Ling, Hypothesis 5 (H5): Fair perception plays a mediating Liu Liu, Zeng Cheng 2019), (Yilin and Hua 2013), etc.; (2) role between risk allocation and contractor’s CPB. The definition of contractor’s CPB is closer to the H1a (+) Risk Liability H2a (+) Trus t Perception (TP) (RL) H3 (+) H2b (+) Consummate Performance Risk Allocation Behavior H4a (+) (CPB) H5 (+) Risk Compensation Fair Perception (RC) (FP) H4b (+) H1b (+) Figure 2. Conceptual framework. 6 Q. LIN ET AL. Table 1. Characteristics of respondents. Characteristics Category Frequency Percentage of total (%) Project role Client 58 35.37 Contractor 82 50.00 Others (consultation, etc.) 24 14.63 Job position Project manager 16 9.76 Department manager 54 32.93 Project engineer 69 42.07 Others 25 15.24 Education Master degree or above 66 40.24 Bachelor degree 78 47.56 Others 20 12.20 Work experience Less than 3 years 13 7.93 3–5 years 17 10.37 6–10 years 108 65.85 More than 10 years 26 15.85 concept of extra-role behavior and organizational citi- The values of Cronbach’s alpha and composite zenship behavior, therefore, this study referred to the reliability (CR) are over 0.70 (see Table 2). This relevant literatures and maturity scales, and made indicates that each variable has good construct adaptive modification to form measurement items; reliability (Hair, Ringle, and Sarstedt 2011). Results (3) Contractor’s trust perception emphasizes contrac- in Table 2 indicate that the average variance extrac- tor’s psychological perception of client’s risk allocation tion (AVE) values are in the range of 0.721–0.814, scheme based on mutual benefit preference. Since the exceeding the satisfactory level of 0.50 (Hair et al. study backgrounds of Xu (Zhichao et al. 2018), Zhang 2016), which prove that the scale has good conver- (Shui-bo, Jun-ying, and Zhen-yu 2015), Yin (Yin et al. gence validity. As shown in Table 3, the AVE of each 2020), Wang (Xueqing 2017), etc. are both about con- variable is higher than its squared correlation with struction projects, the mature scale developed by any other variable, and each measurement item has them will be adopted in this study; (4) Contractor’s the highest loading on the corresponding factor fair perception is adopted the measurement scale of (see Table 4), indicating acceptable discriminant contractor’s fair perception developed by Du et al. validity. (Yaling, Huiling, and Hong 2016), and references the items developed by Zhang (Zhang et al. 2016), Luo (Luo 2007), Hatam (Hatam and Rezaei 2021), etc. 4.4. Test of the structural model and hypotheses All questionnaire items were measured on a 5-point The SmartPLS 3.0 software was used to calculate the Likert-type. After the questionnaire was pretested, the path coefficients and test their significance. The results focus group was used to invite relevant experts to of hypotheses testing are shown in Table 5 and discuss and provide feedback, and finally Figure 3. a questionnaire suitable for this study was formed, as (1) The main effect test and data analysis shown in Table 2. As seen in Table 5 and Figure 2, the path coefficient Theoretically, in order to prevent a party involved in for the hypothesis test of risk liability and contractor’s a project from having homologous deviation in risk CPB was −0.171, but its P value = 0.173 > 0.05, so it is allocation and CPB, the responses of clients, contrac- assumed that H1a did not pass the test. This illustrates tors, and the others (consultation, etc.) were collected that risk liability does not have a significant inducing to complement each other. Questionnaires were all effect on contractor’s CPB. However, the path coeffi - distributed to project managers, department man- cient of the hypothesis test for risk compensation and agers, or contract management professionals of pro- contractor’s CPB was 0.344, and the p value was ject participants. Among them, client (35.37%), 0.022 < 0.05, so it is assumed that H1b passed the contractor (50.00%), and others (14.63%). After var- test. Obviously, risk compensation has a significant iance analysis, the results showed that there was no inducing effect on contractor’s CPB. significant difference in their answer data at 95% con- (2) Mediating effect test and data analysis fidence level. Firstly, from the results shown in Table 5 and Figure 2, the main effect test of risk liability and trust perception was 0.329, P = 0.009 < 0.05; the 4.3. Reliability and validity analysis main effect test of risk compensation and trust per- PLS-SEM was used to perform the conceptual fra- ception was 0.322, P = 0.009 < 0.05. Therefore, mework test. It can be seen from Table 1 that the hypotheses H2a and H2b passed the test. The test of loading of each item is greater than 0.8 (Hulland the main effect of trust perception on contractor’s 2015). This indicates acceptable indicator reliability. CPB was 0.565, P = 0.016 < 0.05. Based on the above JOURNAL OF ASIAN ARCHITECTURE AND BUILDING ENGINEERING 7 Table 2. Items of measurement and reliability and validity analysis. Variable Code Measurement items References Loading Parameters Risk Liability RL1 We believe that contract has reasonable distributed the foreseeable risks. Zhang et al.(Zhang, Zhang, Ying et al. 2016) 0.864 CR = 0.912, RL2 We believe that contract distributes the risks to the willing party. Xu et al.(Zhichao et al. 2018) 0.81 AVE = 0.721, RL3 We believe that contract distributes risks to the party that has the best ability to deal with. Yan et al. (Yan Ling, Liu Liu, Zeng Cheng 0.863 Cronbach’s RL4 We believe that contract risk liability clauses retain flexibility and can cope with unforeseen risks. 2019) 0.859 Alpha = 0.872 Yin et al.(Yilin and Hua 2013) Attila et al.(Attila and Matt 2021) Hwang et al.(Hwang, Zhao, and Gay 2013) Tallaki et al.(Tallaki and Bracci 2021) Risk Compensation RC1 Contract price signed by both parties is reasonable compared with the risks we should bear. Zhang et al.(Zhang, Zhang, Ying et al. 2016) 0.866 CR = 0.924, RC2 The content and scope of contract price adjustment stipulated in contract are reasonable compared with the risks we Xu et al.(Zhichao et al. 2018) 0.914 AVE = 0.803, bear under such circumstances. Yan et al. (Yan Ling, Liu Liu, Zeng Cheng Cronbach’s RC3 If rationalization proposal put forward by us brings benefits to client, the reward provided to us in contract is 2019) 0.907 Alpha = 0.877 reasonable. Yin et al.(Yilin and Hua 2013) Attila et al.(Attila and Matt 2021) Hwang et al.(Hwang, Zhao, and Gay 2013) Tallaki et al.(Tallaki and Bracci 2021) Trust Perception TP1 Client will entrust an important task to us. Xu et al.(Zhichao et al. 2018) 0.844 CR = 0.936, TP2 Client will jointly make decisions with us on important issues concerning the project. Zhang et al (Shui-bo, Jun-ying, and Zhen-yu 0.901 AVE = 0.786, TP3 Client will consult with us about the project related information. 2015) 0.927 Cronbach’s TP4 Client will tell us his development plan Yin et al.(Yin et al. 2020) 0.872 Alpha = 0.909 Wang et al.(Xueqing 2017) Wu et al.(Wu et al. 2020) Fair Perception FP1 Our income is fair relative to our costs Zhang et al.(Zhang, Zhang, Ying et al. 2016) 0.900 CR = 0.946, FP2 Our income is fair relative to the work we have done on the project Luo (Luo 2007) 0.912 AVE = 0.814, FP3 Our income is fair in relation to our obligations Du et al. (Yaling, Huiling, and Hong 2016) 0.902 Cronbach’s FP4 Our income is fair in relation to our efforts on the project Lim et al.(Lim and Loosemore 2017) 0.894 Alpha = 0.924 Hatam et al.(Hatam and Rezaei 2021) Consummate Performance CPB1 We will actively provide extra work beyond the scope of contract for the project free of charge. Yan et al.(Ling, Liang, and Yan 2020, Yan 0.742 CR = 0.941, Behavior CPB2 We will actively internalize and restrain project risks and reduce risk losses. and Guo 2020) 0.886 AVE = 0.764, CPB3 We will take the initiative to notify client of any drawing errors or loopholes in contract. Lim et al.(Lim and Loosemore 2017) 0.876 Cronbach’s CPB4 We will actively help participants who need to adapt to the construction environment. Anvuur et al.(Anvuur, Kumaraswamy, and 0.94 Alpha = 0.921 CPB5 We will actively put forward suggestions conducive to the construction of the project Asce 2012) 0.911 Richardson et al.(Richardson et al. 2021) 8 Q. LIN ET AL. Table 3. Correlation matrix and the square root of AVE of factors. Code RD RC TP FP CPB RL 0.849 RC 0.770 0.896 TP 0.576 0.575 0.886 FP 0.705 0.736 0.665 0.902 CPB 0.51 0.632 0.75 0.638 0.874 Note. Bold values on the diagonal represent the square root of AVE. Table 4. Cross loadings for individual measurement items. Code RL RC FP TP CPB RL1 0.864 0.645 0.545 0.632 0.401 RL2 0.81 0.538 0.394 0.514 0.399 RL 3 0.863 0.684 0.427 0.525 0.411 RL 4 0.859 0.727 0.56 0.693 0.509 RC1 0.678 0.866 0.544 0.706 0.577 RC2 0.692 0.914 0.495 0.613 0.552 RC3 0.697 0.907 0.501 0.654 0.568 TP1 0.441 0.399 0.844 0.546 0.555 TP2 0.524 0.508 0.901 0.634 0.655 TP3 0.572 0.548 0.927 0.633 0.675 TP4 0.495 0.561 0.872 0.545 0.751 FP1 0.684 0.718 0.616 0.9 0.569 FP2 0.629 0.684 0.618 0.912 0.623 FP3 0.62 0.625 0.578 0.902 0.569 FP4 0.609 0.624 0.586 0.894 0.536 CPB1 0.478 0.545 0.595 0.513 0.742 CPB2 0.501 0.609 0.679 0.591 0.886 CPB3 0.399 0.495 0.678 0.562 0.876 CPB4 0.443 0.566 0.683 0.588 0.94 CPB5 0.409 0.542 0.633 0.525 0.911 Table 5. Path coefficient and inspection results. Hypothesis Path Path coefficients T-statistics P value Inference H1a RL → CPB −0.171 1.364 0.173 Not support H1b RC → CPB 0.344 2.293 0.022 Supported H2a RL → TP 0.329 2.616 0.009 Supported H2b RC → TP 0.322 2.640 0.009 Supported H3a RL → TP → CPB 0.186 2.425 0.016 Supported H3b RC → TP → CPB 0.182 2.538 0.011 Supported H4a RL → FP 0.340 2.855 0.004 Supported H4b RC → FP 0.475 4.159 0.000 Supported H5a RL → FP → CPB 0.044 1.213 0.226 Not support H5b RC → FP → CPB 0.061 1.018 0.309 Not support Note. RL, risk liability; RC, risk compensation; CPB, consummate performance behavior; TP, trust perception; FP, fair perception. -0.171 Trust Perception Risk Liability (RL) (TP) 0.565 0.322 Consummate Performance Risk Allocation Behavior (CPB) 0.340 0.129 Risk Compensation Fair Perception (RC) (FP) 0.344 Figure 3. Graphical representation of path coefficient and inspection results. numerical analysis and the test standard of Bootstrap Secondly, the main effect test of risk liability and Method of mediating effect, H3a and H3b passed the fair perception was 0.340, P = 0.004 < 0.05; the hypothesis test, it could be seen that trust perception main effect test of risk compensation and fair per- plays a part in mediating between risk allocation and ception was 0.475, P = 0.000 < 0.05. So hypothesis contractor’s CPB. H4a and hypothesis H4b passed the test, and risk JOURNAL OF ASIAN ARCHITECTURE AND BUILDING ENGINEERING 9 allocation had a positive effect on the contractor’s 5.2. Mediating effect of trust perception perception of fairness. However, the contractor’s Hypotheses H2a and H2b passed the test, which perception of fairness had no significant impact proved that contract risk allocation has a positive on his performance. The hypothesis test of the impact on contractor’s trust perception. For the con- effect of fair perception on CPB was 0.129, sideration of efficiency and fairness, a client should P = 0.226 > 0.05. Therefore, hypothesis H5a and bear the risks within his own control scope and give H5b did not pass the test. This illustrated that fair the contractor reasonable risk compensation at the perception has no mediating effect between con- same time, which can reduce the risk management tract risk allocation and contractor’s CPB. cost of the contractor and improve the project perfor- mance. In construction projects, the contracting par- ties have established a sharing relationship based on 5. Results and discussion the economic incentives of the contract. However, the contracting parties are generally faced with an asym- 5.1. Contract risk allocation’s impact on metric trading situation, and the client setting up contractor’s CPB a reasonable risk allocation mechanism is to send The results showed that reasonable risk compensa- a good faith signal to the contractor. At the same tion can promote contractor’s CPB (H1b), which is time, due compensation is given to the contractor for in line with prior studies of Yan et al. (Yan Ling, Liu the state changes in the contract execution process, Liu, Zeng Cheng 2019; Ling et al. 2017), who have which shows the dynamic changes in the generation proved by situational experiments that reasonable and maintenance of trust between the two parties. risk compensation can guarantee contractor to get Hypotheses H3a and H3b passed the test, which corresponding compensation for the risks he bears showed that trust perception has a positive effect on and encourage the contractor to continuously contractor’s CPB. Trust perception provides motive improve the level of efforts and achieve good per- support for the mutual benefit and win–win relation- formance. This study obtained a similar conclusion ship between the parties. In a relationship of strong by developing a formal and explicit model and trust, contractor changes from short-sighted pursuit of empirically tested and generally confirmed. unilateral interests to pursuit of project value-added. Reasonable risk compensation emphasizes that The establishment of trust relationship reduces the the contract price signed by both parties is reason- anxiety of the contracting parties to the possible losses able compared with the risk borne by the contrac- of the other party, makes the distribution of rights, tor. It also means that when a contractor bears responsibilities, and interests more reasonable, and risks other than those preset in the contract due promotes the positive cooperative behavior of both to changes in the external environment, the con- parties. In the process of project implementation, con- tract should be provided with corresponding tractors should deepen the consideration of the overall adjustment measures, so that the contractor can benefits of the project, activate the power source of get corresponding reasonable profits and opportu- self-improvement, increase the investment in improv- nity benefits. ing the project performance, and actively take actions The results showed that contract risk liability has beyond the contract. no impact on contractor’s CPB (H1a). This is inconsis- Although risk liability has no direct effect on con- tent with Zhang et al. (Zhang, Zhang, Ying et al. 2016), tractor’s CPB, it indirectly promotes contractor’s CPB who find that it will induce contractor’s CPB when the after trust perception is added as a mediating variable. risk liability meets contractor’s expectation. The rea- This proves that trust perception plays a part- sonable risk liability mechanism reflects the fairness mediating role between risk allocation and contrac- of the transaction and shows the goodwill of the tor’s CPB, that is, the establishment of trust plays client to the contractor and the determination to a promoting role in the process of risk allocation affect - cooperate. From the contract reference point theory, ing contractor’s CPB. As a manifestation of reciprocal the efficiency of ex-post execution of the initial con- preference, trust perception eliminates contractors tract injected with reasonable risk liability depends on from taking opportunistic measures and increases contractor’s sense of entitlement. Specifically, if the additional motivation for CPB. Reasonable risk alloca- ex-post result is consistent with the expectation of tion scheme provides compensation for contract con- the contract reference point, contract risk liability can straint and contract state change, so client and stimulate contractor’s CPB. On the contrary, contrac- contractor can receive corresponding compensation. tors will only implement the minimum standards and It has also got rid of strict contract constraints and adopt perfunctory performance behavior, and may strong organizational control, providing a broad even cause the performance of the project to be space for contractors to create value-added contract agreements. The expected accumulation of long-term impaired. 10 Q. LIN ET AL. income leads to the formation of contractor’s CPB, 6. Conclusions and implications which explains why trust perception becomes Based on the contract reference point theory, this a mediating variable between risk allocation and con- study constructs a conceptual framework among risk tractor’s CPB. Reasonable risk allocation strategy allocation, trust perception, fair perception, and con- arouses the trust of contractor, and enhances contrac- tractor’s CPB. The empirical analysis through the data tor’s CPB. collected by questionnaire reveals the mechanism that contract risk allocation triggers contractor’s CPB. The 5.3. Mediating effect of fair perception study results enrich the contract reference point theory and provide the basis for client to design contract The results show that hypotheses H4a and H4b passed clauses that effectively encourage contractor’s CPB. the test, risk liability and risk compensation have posi- tive effects on contractor’s fair perception. Risk liability should be reasonable, too many risks cannot be trans- 6.1. Theoretical implications ferred to contractor (Zhichao et al. 2018). If the con- Compared with previous studies, the theoretical impli- tractor bears too many risks in the project cations of this study are the following two aspects: implementation process, even if his quotation includes First, a lot of the existing literatures believe that risk certain risk compensation fees, the contractor will still allocation scheme in contract will significantly affect suffer from serious unfairness due to taking too many contractor’s fair perception, the more reasonable the risks (Zhang, Zhang, Ying et al. 2016). Yin et al. (Yin contract risk allocation scheme is, the better the fair et al. 2020) reveal the impact path of reasonable risk perception of contractor will be. However, the conclu- allocation on project income from the perspective of sion of this study finds that only relying on contractor’s social capital, believing that reasonable risk allocation fair perception cannot induce contractor’s CPB. clauses can enhance the fair perception of contractors Attention should be paid to, but the role of fair percep- and promote cooperation between the two parties. tion of contractors should not be exaggerated. However, hypotheses H5a and H5b did not pass Second, previous studies on the incentive effect of the test, it showed that contractor’s fair perception contract risk allocation have mostly focused on how to has no significant impact on his CPB. The reason lies inhibit opportunistic behavior, without considering in two aspects: (1) contractor’s fair perception mainly whether contract risk allocation can encourage con- comes from the comparison between the return and tractors to choose a higher level of performance beha- the payment generated by the risk allocation and vior. This study reveals that construction project from the economic incentive of the contract risk contract risk allocation scheme needs to trigger con- allocation to contractor. From the perspective of tractor’s trust perception, so as to more effectively psychological perception, people are more likely to induce contractor to engage in CPB and truly play the accept upward adjustments than downward adjust- incentive effect of contract risk allocation. ments, that is, contractors are more sensitive to unreasonable risk allocation. The contractor will pre- set an anchor value for risk allocation at the initial 6.2. Managerial implications stage, which can be accepted. If a client formulates According to the conclusions of this study, combined a more stringent risk allocation scheme, resulting in with the specific situation of construction projects, the a deviation between the allocation of rights and following suggestions are put forward for contract responsibilities in the contract and contractor’s design guided by contractor’s CPB: expectation, the part lower than the expectation will be regarded as individual loss, thus the contrac- tor will feel a strong sense of unfairness and take 6.2.1. Improve contract risk allocation scheme so as opportunistic actions to punish the client. (2) The to provide health incentives for contractor’s CPB contract reference point theory proposed by Hart At the present stage of Chinese construction market, and Moore points out that the consummate perfor- due to the dominant position, client often distributes mance achieved by CPB is the basis of value-added most of the risks to contractor to reduce his own costs, benefit sharing (Hart and Moore 2008). The CPB is an resulting in unreasonable transfer of risks. This study altruistic act based on self-interest and also an has confirmed the incentive effect of reasonable risk altruistic act outside the role, including actively con- allocation on contractor, so it is necessary for client to trolling risks and making up the contract loopholes. further improve the rationality of the risk allocation The whole life cycle of the project and the complex- scheme in contract and to motivate contractor’s CPB. ity of the situation determine the diversity of con- Nonetheless, this study found that the economic tractor’s motivation for performing the contract. Only incentive generated by relying solely on risk allocation contractor’s fair perception can usually not motivate can induce contractor’s fair perception, but it cannot contractor’s CPB. necessarily stimulate his CPB. However, contractor’s JOURNAL OF ASIAN ARCHITECTURE AND BUILDING ENGINEERING 11 trust perception induced by the cooperative value Notes on contributors generated by contract risk allocation is part of the Qing Lin, doctor in management, senior consulting engineer, intermediary path to stimulate contractor’s CPB. Zonleon Construction Consulting Co., Ltd, Guangzhou Therefore, when formulating a risk allocation strategy, 510640, China. Email: 805060862@qq.com. the client should consider setting up an incentive Ling Yan, doctor in management, professor in Dept. of mechanism that matches the contractor’s trust percep- Construction Management, School of Management, Tianjin tion, so as to better induce contractor’s CPB. University of Technology, Tianjin 300384, China. Email: 444392566@qq.com. Yi-lin Yin, professor, School of Management, Tianjin 6.2.2. Establish a project management mode of University of Technology, Tianjin 300384, China. Email: yinyi- “mutual trust and cooperation” between client and lin575@163.com.Yi-lin Yin, professor, School of Management, contractor to provide continuous incentives for Tianjin University of Technology, Tianjin 300384, China. contractor’s CPB Email: yinyilin575@163.com. The current idea of construction contract designing still aims at the realization of perfunctory performance, Data availability statement which is obviously not conducive to the realization of the goal of engineering procurement construction All data, models, or code that support the findings of this aiming at inspiring contractor’s CPB and the value- study are available from the corresponding author upon reasonable request (444392566@qq.com). added of the project. This study proved that client’s designing of contract should not only pay attention to giving reasonable economic compensation to contrac- References tors, but also pay attention to improving contractor’s Abednego, M. P., and S. O. 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Trust or fairness is more important:research on the mechanism of contract risk allocation inducing contractor to consummate performance behavior

Trust or fairness is more important:research on the mechanism of contract risk allocation inducing contractor to consummate performance behavior

Abstract

Contractor’s consummate performance behavior (CPB) is the key to achieve consummate performance. However, the mechanism of reasonable contract risk allocation incentives for Contractor’s CPB is unknown. The objective of this study is to reveal the effective ways to encourage contractor’s CPB by contract risk allocation based on the contract reference point theory and selecting the contractor’s trust perception and fair perception as mediating variables. Through an...
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JOURNAL OF ASIAN ARCHITECTURE AND BUILDING ENGINEERING https://doi.org/10.1080/13467581.2023.2172323 CONSTRUCTION MANAGEMENT Trust or fairness is more important:research on the mechanism of contract risk allocation inducing contractor to consummate performance behavior a,b a a Qing Lin , Ling Yan and Yilin Yin a b School of Management, Tianjin University of Technology, Tianjin, China; Zonleon Construction Consulting Co., Ltd, Guangzhou, China ABSTRACT ARTICLE HISTORY Received 22 May 2021 Contractor’s consummate performance behavior (CPB) is the key to achieve consummate Accepted 19 January 2023 performance. However, the mechanism of reasonable contract risk allocation incentives for Contractor’s CPB is unknown. The objective of this study is to reveal the effective ways to KEYWORDS encourage contractor’s CPB by contract risk allocation based on the contract reference point Risk allocation; consummate theory and selecting the contractor’s trust perception and fair perception as mediating vari- performance behavior (CPB); ables. Through an empirical analysis of the valid questionnaires collected, the results are as trust perception; fair follows: (1) Although the economic benefits generated by reasonable contract risk allocation perception can induce contractor’s fair perception, fair perception has no mediating effect in the relation- ship between contract risk allocation and contractor’s CPB; (2) The cooperative value generated by reasonable contract risk allocation can induce contractor’s trust perception, and trust perception plays a part mediating role between contract risk allocation and contractor’s CPB. The findings also provide insights into how risk allocation facilitates contractor’s CPB in the construction industry. 1. Introduction behavior (Yan and Guo 2020). However, there is no research on how to induce contractors to perform CPB As one of the most important subjects of construction project implementation, the contractor’s performance from the perspective of clients. behavior is very important to the realization of project In construction projects, a lot of scholars believe that a reasonable contract risk allocation scheme is performance (Memon et al. 2021; Li, Yin, and Zhang 2020; Skitmore et al. 2020). The contract reference the main incentive mechanism to induce contractor’s point theory proposed by Hart and Moore divides pro- cooperative behavior and improve project perfor- mance (Memon et al. 2021; Zhang et al. 2016; ject performance into perfunctory performance (PP) and consummate performance (CP) and points out that CP is Nguyen, Rameezdeen, and Chileshe et al. 2021; the basis of project benefit sharing (Hart and Moore Peckiene, Komarovska, and Ustinovicius 2013). 2008). On this basis, scholars such as Liu et al. (Liu However, some studies have shown that reasonable et al. 2019) and Yan et al. (Ling, Zhixiu, and Jiaojiao risk allocation does not necessarily bring positive 2018) further divide the performance behaviors into behaviors of contractors. On the contrary, reasonable perfunctory performance behavior, consummate per- risk allocation clauses designed in contract may be used by contractors, resulting in a large number of formance behavior (CPB), and opportunistic behavior according to the different performance efficiency of opportunistic behaviors and reducing project perfor- contractor, and point out that CPB plays a key role in mance (Lu et al. 2015; Zhichao et al. 2018). It can be seen that a reasonable risk allocation scheme designed the smooth implementation of project and even the improvement of project performance, which is the by the client in the contract does not necessarily moti- core concern of client. CPB exists objectively, but it is vate the contractor to perform CPB, but also needs to consider the intermediary conditions that can trigger difficult to be confirmed by a third party (Hart and Moore 2008), which cannot be enforced by law, and contractor’s CPB. Some studies have shown that beha- must be based on the voluntary provision of partners viors of contracting parties are not entirely interest- (Williamson 1975). Yan et al. reveal the driving factors oriented but also influenced by social preference and formation mechanism of contractor’s CPB from the (Zhou et al. 2012). The signals of trust and fairness perspectives of behavior attitude, subjective norm, and conveyed by the reasonable risk allocation mechanism perceived behavior control (Ling, Liang, and Yan 2020), itself will stimulate the social preference of contractor, and thus induce contractor’s positive behaviors (Kraft, and establish the theoretical framework of contractor’s CPB from the perspective of contractor’s internal Valdés, and Zheng 2017). CONTACT Ling Yan 444392566@qq.com; 173103402@stud.tjut.edu.cn School of Management, Tianjin University of Technology, Tianjin 300384, China © 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group on behalf of the Architectural Institute of Japan, Architectural Institute of Korea and Architectural Society of China. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. 2 Q. LIN ET AL. In summary, there is no clear theoretical model to and has the ability to control at an appropriate time reveal the relationship between risk allocation and and getting certain economic compensation for risk- CPB. To fill this gap, this study aims to explore the bearing (Barnes 1983; Koh, Ahmed, and Kayis et al. mechanism that risk allocation triggers contractor’s 2007). Based on incomplete contract theory, Yin et al. CPB, based on a formal theoretical linkage model and construct a risk allocation framework for the contract- a statistical empirical investigation. To further explore ing stage of construction projects, suggesting that the how and when this mechanism occurs, trust and fair measurement dimensions of initial risk allocation perception are introduced as mediating variables, include completeness, enforceability, and incentive which is helpful to better understand the potential (Yilin, Dong, and Yao 2015). According to the sources, mechanism of risk allocation inducing contractor’s Zhang et al. put the project risks divide into environ- CPB. The study collected a total of 164 valid question- mental risks and behavioral risks. The reasonable risks naires by issuing questionnaires. The reliability and allocation should be that the behavior risks are borne validity of the collected data have been tested by by the subject of the behavior, and the environmental SPSS Statistics21.0, and then the hypotheses were risks are shared by both contracting parties (Zhang tested by Smart PLS3.0 of SEM-PLS. The research et al. 2016). Based on the contract reference point results will provide new insights for the contract refer- theory, Yan et al. have confirmed that the contract ence point theory and provide theoretical basis for risk allocation mechanism can be further subdivided designing contract clauses that effectively encourage into two dimensions: risk liability and risk compensa- contractor’s CPB. tion (Yan Ling, Liu Liu, Zeng Cheng 2019). The core of The remainder of this paper is organized as follows: risk liability lies in clarifying the situation or result of Section 2 introduces the literature review. Section 3 the risk undertaken by both parties; Risk compensation presents the conceptual framework and hypothesis emphasizes that the contract price signed by both development. Section 4 presents the method. parties is fair compared with the risk that contractor Section 5 reports the results and discussion. It ends should bear. up with implications for theory and practice as well as concluding remarks. The overall scope and procedure of this study is shown in Figure 1. 2.2. Contractor’s Consummate Performance Behavior (CPB) 2. Literature review Previous studies on contractor’s behavior mainly focus on two aspects. One is based on transaction cost the- 2.1. Contract risk allocation ory, focusing on restraining opportunistic behavior Risk allocation is the key issue of construction project and promoting cooperative behavior of contractors contract governance, and it is also a hot research topic (Lu et al. 2015; Ahimbisibwe 2014). In this perspective, in academic and practical circles (Zhichao et al. 2018; researchers pay more attention to contractor’s in-role Tsai and Yang 2009; Cha and Shin 2011; Zhang et al. behavior but are less concerned about the extra-role 2021). Reasonable risk allocation refers to the alloca- behavior that cannot be written in the contract and tion of risks to the party who voluntarily undertakes has a positive effect on construction project (Memon Backgroud Objective Methodlogy 1.Review is conducted about risk 1.Contractor’s CPB is the key to The objective of this allocation, CPB, trust perception and achieve consummate performance, study is to reveal the and contract risk allocation is an fair perception based on contract effective ways to reference point theory. important factor affecting encourage the 2.Through literature review, the contractor’s behaviors. contractor's CPB by 2.However, the mechanism of contract research hypothesis and conceptual contract risk framework are developed. risk allocation incentives for allocation. 3.With data collected and analyzed, the contractor’s CPB is unknown . conceptual frameworkis tested. Literature review Conceptual framework development Conclusion 1.This study developeda conceptual framework which revealsthe Questionnaire design and data collection mechanism that contract risk allocation triggers contractor's CPB. 2.Contract reasonable risk compensation can promote contractor's Reliability and validity analysis CPB, however, risk liability is not obvious. 3.Trust perception plays a part mediating role between contract risk Conceptual frame work testing allocation and contractor's CPB, but fair perception has no mediating effect. Discussion and conclusion Figure 1. The research scope and procedure. JOURNAL OF ASIAN ARCHITECTURE AND BUILDING ENGINEERING 3 et al. 2021; Li et al. 2019). The second perspective As an academic term, fair perception focuses on the focuses on the organizational citizenship behavior of fair feelings of individuals with fair preference for contractors based on organizational behavior theory. giving and feedback (Liu et al. 2012). The formation Contractor’s organizational citizenship behavior has of contractor’s fair preference depends on the com- a positive effect on construction projects (Lim and parison between the results obtained and its con- Loosemore 2017; Wang et al. 2018), but belonging to tract reference points (Yan Ling, Liu Liu, Zeng individual level, not organizational level. Cheng 2019). The academic research on fair percep- Different from the two aspects above, based on the tion mainly focuses on supply chain, income distri- contract reference point theory, the initial contract bution, and other fields and their measures from concluded by the construction project participants three dimensions: distribution fairness, procedural provides a reference point for the parties’ trading rela- fairness, and interactive fairness (Luo 2007; Baird, tionship through the feelings of entitlement. Parties Su, and Nuhu 2021). Based on the characteristics might choose corresponding performance behavior of construction projects, Du et al. divide contractor’s based on their sense of entitlement (Hart and Moore fair perception into two dimensions: distribution 2008; Fehr, Hart, and Zehnder 2011). The choice of fairness and procedural fairness (Yaling, Huiling, contractor’s behavior strategy is affected by the con- and Hong 2016). tract reference point. That is, when the contractor feels that he has obtained the rights and interests stipulated in the contract, he will perform CPB. Otherwise, con- 3. Conceptual framework and hypotheses tractors are only willing to implement contracts development according to the minimum standards, or even retalia- 3.1. Contract risk allocation and contractor’s CPB tory opportunism (Ling, Liang, and Yan 2020). With reference to the definition of extra-role behavior and Risk allocation mechanism is the most important organizational citizenship behavior, this study defines mechanism in contract governance. A reasonable contractor’s CPB as the inter-organizational perfor- risk allocation mechanism should not only emphasize mance behavior (Wang et al. 2018) that contractor is reasonable risk liability, that is, too many risks can not willing to make extra efforts to implement the project be transferred to contractor, but also pay attention to in the spirit of contract, which is characterized by the rationality of risk compensation, that is, contrac- voluntary, initiative, and altruism (Yan and Guo 2020). tor can get matching compensation for the risks he bears (Yan Ling, Liu Liu, Zeng Cheng 2019). In fact, the two dimensions of risk allocation not only reflect 2.3. Trust perception client’s economic incentives to contractor but also Trust refers to an individual’s willingness to believe reflect client’s consideration of interests of contractor that the other party will be mutually beneficial in and his friendly tendency to contractor (Meng 2012). certain risk activities. Trust originates from communi- There is no doubt that risk allocation is closely related cation and is an embodiment of interpersonal rela- to contractor’s income. Risk allocation reflecting effi - tionships (Qin, Hua, and Tang 2010). It is also an ciency and fairness can induce contractors to respond effective tool for managing organizational relation- positively to the expectation of client, taking recipro- ships (Wu et al. 2020). Trust has reciprocity, which is cal CPB (Yilin, Dong, and Yao 2015; Klotz and Bolino a kind of interactive relationship. It is the motivated 2013). Branconi points out that a reasonable risk altruistic behavior that people take the initiative to allocation mechanism can coordinate the relevant others based on the expectation of reciprocal positive relations among all parties involved in a project and reciprocal behavior of others. In other words, the guides them to make decisions in good faith (Von expectation of trusting others is the positive recipro- Branconi and Loch 2004). On the contrary, if a client cal behavior of winning others’ subsequent repay- adopts an unreasonable risk allocation, the risks faced ment (Chan and Au 2008). In this study, trust by the contractor will exceed his scope of commit- perception refers to contractor’s perception of the ment, so that the contractor may choose opportunis- trust and goodwill signal transmitted by client’s rea- tic behaviors, such as lowering the quality of the sonable risk allocation. Some studies have proved project or claiming for a higher price (Pang et al. that reasonable risk allocation is a necessary condi- 2015). Thus the following are hypothesized: tion for contractors to generate trust perception (Pei, Hypothesis 1 (H1): Risk allocation is positively Guo-jie, and Yin-li 2015). related to contractor’s CPB. Hypothesis 1a (H1a): The more reasonable the risk liability, the more likely contractor will engage in CPB. 2.4. Fair perception Hypothesis 1b (H1b): The more reasonable the risk Fairness means that ”a decision, outcome, or proce- compensation, the more likely contractor will engage dure is both balanced and correct” (Pan et al. 2017). in CPB. 4 Q. LIN ET AL. can be inferred that the trust interaction between 3.2. The mediating role of contractor’s trust contractor and client is probably the key mediating perception variable between risk allocation of client and contrac- Contractor’s trust perception is a kind of expectation or tor’s CPB. According to this, combining with hypoth- evaluation of client’s ability to provide beneficial beha- esis 1 and hypothesis 2, the following hypothesises are viors based on client’s positive intentions and wishes proposed: under the uncertainty and risks (Mayer, Davis, and Hypothesis 3 (H3): Contractor’s trust perception Schoorman 1995). If one party takes the risk, the plays a mediating role between risk allocation and other party will regard behaviors as a kind of trust contractor’s CPB. and make a positive return (Lester and Brower 2003). Hypothesis a (H3a): Contractor’s trust perception Reasonable risk allocation is the result of modification plays a mediating role between risk liability and con- and re-modification of risk allocation strategy formed tractor’s CPB. by client on the basis of mutual benefit and win–win Hypothesis 3b (H3b): Contractor’s trust perception consideration (Lau and Lam 2008), which conveys the plays a mediating role between risk compensation and signal and willingness of client to trust contractor and contractor’s CPB. actively cooperate (Zhichao et al. 2018). Reasonable risk liability and compensation clauses in the contract grant the contractor more control over the project and 3.3. The mediating role of contractor’s fair stimulate his trust perception in the client (Seibert, perception Silver, and Randolph 2004). Furthermore, contractors will have a sense of respect, deeply awaken his aware- Franke et al. find that income distribution will affect ness of trust in clients, and devote more energy and participants’ fair perception (Franke, Keinz, and capital to maintain the cooperative relationship with Klausberger 2013). Risk allocation is the most impor- client (Pierce and Gardner 2004). Thus, the following tant income distribution measure in construction pro- are hypothesized: jects (Peckiene, Komarovska, and Ustinovicius 2013). Hypothesis 2 (H2): Reasonable risk allocation can Reasonable division of risk liability is the basis of coop- enhance contractor’s trust perception eration between the contracting parties. The essence Hypothesis 2a (H2a): The more reasonable the risk of contracting and performance process of construc- liability, the stronger contractor’s trust perception. tion contract is the game process between the con- Hypothesis 2b (H2b): The more reasonable the risk tracting parties. It is usually close to the optimal state compensation, the stronger contractor’s trust to establish a division interval of risk liability that both perception. parties can bear (Yilin, Dong, and Yao 2015). The economic incentive of risk allocation will bring Contractors have an expectation of their own risk lia- better performance from those who are motivated, bility scope in advance and set an acceptable range. If which is widely accepted in economic reasoning. the income generated from the risk allocation of the However, the difference in understanding of reason- contract is in this expected range, contractor will feel able risk allocation between client and contractor that it is fair; once this interval is exceeded, contractor often leads to partial failure of the incentive function will feel that he has exceeded his acceptance thresh- for reasonable risk allocation. Therefore, if a client old, and the sense of unfairness will be significantly wants to motivate contractor’s CPB, it needs to pro- increased. Compensation symbolizes a kind of recipro- mote contractor’s recognition of a reasonable risk allo- city of benefits and responsibilities and is contractor’s cation scheme and perceive the positive signal sent by psychological expectation of risks and benefits. the client (Abednego and Ogunlana 2006). Contracts Reasonable risk compensation implies the existence will change contractor’s cognitive style, and contrac- of fairness (Yan Ling, Liu Liu, Zeng Cheng 2019). For tor’s behavior according to the terms in contract may example, Lehtiranta points out the impact of risk liabi- be a comprehensive response to risk liability and com- lity clauses in contract on contractor’s fair perception pensation. For contractors, reasonable risk allocation (Lehtiranta 2014). Aibinu’s study focuses on the impact bears a positive signal that clients trust contractors of contract risk compensation clauses on contractor’s (Mayer, Davis, and Schoorman 1995). A large number fair perception in the process of claim processing of construction practices show that when client (Aibinu, Ling, and Ofori 2011). Therefore, the following chooses a reasonable contract risk allocation scheme, are hypothesized: contractor feels the goodwill and trust signal of client, Hypothesis 4 (H4): Reasonable risk allocation can thinks that active performance can get due reward and enhance contractor’s fair perception. compensation, and actively performs obligations Hypothesis 4a (H4a): The more reasonable the risk under trust perception (Zhichao et al. 2018), and even liability, the stronger contractor’s fair perception. adopts organizational citizenship behavior that is more Hypothesis 4b (H4b): The more reasonable the risk beneficial to client (Serva, Fuller, and Mayer 2010). It compensation, the stronger contractor’s fair perception. JOURNAL OF ASIAN ARCHITECTURE AND BUILDING ENGINEERING 5 Fair perception is an important behavioral induce- Hypothesis 5a (H5a): Fair perception plays a mediating ment variable, which is an individual’s subjective judg- role between risk liability and contractor’s CPB. ment of whether his effort is consistent with his reward Hypothesis 5b (H5b): Fair perception plays (Ling, Yi-fan, and Yu-wei 2018). In construction pro- a mediating role between risk compensation and con- jects, a reasonable compensation mechanism can tractor’s CPB. effectively enhance contractor’s fair perception and The above-mentioned series of hypotheses devel- induce his CPB (Yan Ling, Liu Liu, Zeng Cheng 2019). opment discuss the relationship between risk alloca- In the research of fair perception inducing the behavior tion as an independent variable and contractor’s CPB of all parties in a transaction, Liu et al. (Liu et al. 2012) as a dependent variable and choose trust and fair have proven that fair perception is the key factor to perception as mediating variables to study the direct enhance the cooperation effect from the construction and indirect paths of risk allocation affecting contrac- project organization composed of multiple partici- tor’s CPB. The conceptual framework of this study is pants and that fair perception can also strengthen shown in Figure 2. the positive influence of trust and communication on cooperation. At the same time, fair perception can 4. Methods inhibit opportunistic behavior and reduce manage- ment costs (Baird, Su, and Nuhu 2021). In construction 4.1. Sampling and procedure project, if a contractor thinks that the transaction is fair, The respondents were drawn from clients’ and con- he may take active extra-role actions, such as actively tractors’ project managers or contract managers, from improving the level of efforts, optimizing the design, different construction projects in Beijing, Tianjin, and making up for contract loopholes (Ling, Liang, and Anhui, Guangxi, Jiangsu, Guangdong, Shandong, and Yan 2020). Through interviews and questionnaires with other regions. The questionnaires were collected by 41 experienced contractors in Singapore, Aibinu et al. mail and on-site interviews. A total of 212 question- find that fair perception will affect contractor’s work naires were distributed from March to June 2020, and attitude and behavior in the process of processing 164 valid questionnaires were received, with an effec - engineering claims (Aibinu, Ling, and Ofori 2011). If tive response rate of 77.36%. See Table 1 for the char- a contractor feels a strong sense of unfairness, he will acteristics of interviewees and their items. likely engage in opportunistic behavior, leading to contract disputes between client and contractor, resulting in a decrease in the efficiency of contract 4.2. Questionnaire design performance afterwards (Yan Ling, Liu Liu, Zeng Cheng 2019). Obviously, fair perception becomes the In the conceptual framework, the independent vari- key factor to induce the project participants to actively able is the measurement of two dimensions of risk perform their duties. Improving contractor’s fair per- allocation, and the mediating variables are the mea- ception can effectively reduce disputes and promote surement of contractor’s trust perception and fair per- cooperation. ception. The dependent variable is the measurement Therefore, in combination with hypothesis 1 and of contractor’s CPB. The details are as follows: (1) Risk hypothesis 4, this study put forward the following distribution and risk compensation were integrated hypotheses: the studies of Zhang (Zhang et al. 2016), (Yan Ling, Hypothesis 5 (H5): Fair perception plays a mediating Liu Liu, Zeng Cheng 2019), (Yilin and Hua 2013), etc.; (2) role between risk allocation and contractor’s CPB. The definition of contractor’s CPB is closer to the H1a (+) Risk Liability H2a (+) Trus t Perception (TP) (RL) H3 (+) H2b (+) Consummate Performance Risk Allocation Behavior H4a (+) (CPB) H5 (+) Risk Compensation Fair Perception (RC) (FP) H4b (+) H1b (+) Figure 2. Conceptual framework. 6 Q. LIN ET AL. Table 1. Characteristics of respondents. Characteristics Category Frequency Percentage of total (%) Project role Client 58 35.37 Contractor 82 50.00 Others (consultation, etc.) 24 14.63 Job position Project manager 16 9.76 Department manager 54 32.93 Project engineer 69 42.07 Others 25 15.24 Education Master degree or above 66 40.24 Bachelor degree 78 47.56 Others 20 12.20 Work experience Less than 3 years 13 7.93 3–5 years 17 10.37 6–10 years 108 65.85 More than 10 years 26 15.85 concept of extra-role behavior and organizational citi- The values of Cronbach’s alpha and composite zenship behavior, therefore, this study referred to the reliability (CR) are over 0.70 (see Table 2). This relevant literatures and maturity scales, and made indicates that each variable has good construct adaptive modification to form measurement items; reliability (Hair, Ringle, and Sarstedt 2011). Results (3) Contractor’s trust perception emphasizes contrac- in Table 2 indicate that the average variance extrac- tor’s psychological perception of client’s risk allocation tion (AVE) values are in the range of 0.721–0.814, scheme based on mutual benefit preference. Since the exceeding the satisfactory level of 0.50 (Hair et al. study backgrounds of Xu (Zhichao et al. 2018), Zhang 2016), which prove that the scale has good conver- (Shui-bo, Jun-ying, and Zhen-yu 2015), Yin (Yin et al. gence validity. As shown in Table 3, the AVE of each 2020), Wang (Xueqing 2017), etc. are both about con- variable is higher than its squared correlation with struction projects, the mature scale developed by any other variable, and each measurement item has them will be adopted in this study; (4) Contractor’s the highest loading on the corresponding factor fair perception is adopted the measurement scale of (see Table 4), indicating acceptable discriminant contractor’s fair perception developed by Du et al. validity. (Yaling, Huiling, and Hong 2016), and references the items developed by Zhang (Zhang et al. 2016), Luo (Luo 2007), Hatam (Hatam and Rezaei 2021), etc. 4.4. Test of the structural model and hypotheses All questionnaire items were measured on a 5-point The SmartPLS 3.0 software was used to calculate the Likert-type. After the questionnaire was pretested, the path coefficients and test their significance. The results focus group was used to invite relevant experts to of hypotheses testing are shown in Table 5 and discuss and provide feedback, and finally Figure 3. a questionnaire suitable for this study was formed, as (1) The main effect test and data analysis shown in Table 2. As seen in Table 5 and Figure 2, the path coefficient Theoretically, in order to prevent a party involved in for the hypothesis test of risk liability and contractor’s a project from having homologous deviation in risk CPB was −0.171, but its P value = 0.173 > 0.05, so it is allocation and CPB, the responses of clients, contrac- assumed that H1a did not pass the test. This illustrates tors, and the others (consultation, etc.) were collected that risk liability does not have a significant inducing to complement each other. Questionnaires were all effect on contractor’s CPB. However, the path coeffi - distributed to project managers, department man- cient of the hypothesis test for risk compensation and agers, or contract management professionals of pro- contractor’s CPB was 0.344, and the p value was ject participants. Among them, client (35.37%), 0.022 < 0.05, so it is assumed that H1b passed the contractor (50.00%), and others (14.63%). After var- test. Obviously, risk compensation has a significant iance analysis, the results showed that there was no inducing effect on contractor’s CPB. significant difference in their answer data at 95% con- (2) Mediating effect test and data analysis fidence level. Firstly, from the results shown in Table 5 and Figure 2, the main effect test of risk liability and trust perception was 0.329, P = 0.009 < 0.05; the 4.3. Reliability and validity analysis main effect test of risk compensation and trust per- PLS-SEM was used to perform the conceptual fra- ception was 0.322, P = 0.009 < 0.05. Therefore, mework test. It can be seen from Table 1 that the hypotheses H2a and H2b passed the test. The test of loading of each item is greater than 0.8 (Hulland the main effect of trust perception on contractor’s 2015). This indicates acceptable indicator reliability. CPB was 0.565, P = 0.016 < 0.05. Based on the above JOURNAL OF ASIAN ARCHITECTURE AND BUILDING ENGINEERING 7 Table 2. Items of measurement and reliability and validity analysis. Variable Code Measurement items References Loading Parameters Risk Liability RL1 We believe that contract has reasonable distributed the foreseeable risks. Zhang et al.(Zhang, Zhang, Ying et al. 2016) 0.864 CR = 0.912, RL2 We believe that contract distributes the risks to the willing party. Xu et al.(Zhichao et al. 2018) 0.81 AVE = 0.721, RL3 We believe that contract distributes risks to the party that has the best ability to deal with. Yan et al. (Yan Ling, Liu Liu, Zeng Cheng 0.863 Cronbach’s RL4 We believe that contract risk liability clauses retain flexibility and can cope with unforeseen risks. 2019) 0.859 Alpha = 0.872 Yin et al.(Yilin and Hua 2013) Attila et al.(Attila and Matt 2021) Hwang et al.(Hwang, Zhao, and Gay 2013) Tallaki et al.(Tallaki and Bracci 2021) Risk Compensation RC1 Contract price signed by both parties is reasonable compared with the risks we should bear. Zhang et al.(Zhang, Zhang, Ying et al. 2016) 0.866 CR = 0.924, RC2 The content and scope of contract price adjustment stipulated in contract are reasonable compared with the risks we Xu et al.(Zhichao et al. 2018) 0.914 AVE = 0.803, bear under such circumstances. Yan et al. (Yan Ling, Liu Liu, Zeng Cheng Cronbach’s RC3 If rationalization proposal put forward by us brings benefits to client, the reward provided to us in contract is 2019) 0.907 Alpha = 0.877 reasonable. Yin et al.(Yilin and Hua 2013) Attila et al.(Attila and Matt 2021) Hwang et al.(Hwang, Zhao, and Gay 2013) Tallaki et al.(Tallaki and Bracci 2021) Trust Perception TP1 Client will entrust an important task to us. Xu et al.(Zhichao et al. 2018) 0.844 CR = 0.936, TP2 Client will jointly make decisions with us on important issues concerning the project. Zhang et al (Shui-bo, Jun-ying, and Zhen-yu 0.901 AVE = 0.786, TP3 Client will consult with us about the project related information. 2015) 0.927 Cronbach’s TP4 Client will tell us his development plan Yin et al.(Yin et al. 2020) 0.872 Alpha = 0.909 Wang et al.(Xueqing 2017) Wu et al.(Wu et al. 2020) Fair Perception FP1 Our income is fair relative to our costs Zhang et al.(Zhang, Zhang, Ying et al. 2016) 0.900 CR = 0.946, FP2 Our income is fair relative to the work we have done on the project Luo (Luo 2007) 0.912 AVE = 0.814, FP3 Our income is fair in relation to our obligations Du et al. (Yaling, Huiling, and Hong 2016) 0.902 Cronbach’s FP4 Our income is fair in relation to our efforts on the project Lim et al.(Lim and Loosemore 2017) 0.894 Alpha = 0.924 Hatam et al.(Hatam and Rezaei 2021) Consummate Performance CPB1 We will actively provide extra work beyond the scope of contract for the project free of charge. Yan et al.(Ling, Liang, and Yan 2020, Yan 0.742 CR = 0.941, Behavior CPB2 We will actively internalize and restrain project risks and reduce risk losses. and Guo 2020) 0.886 AVE = 0.764, CPB3 We will take the initiative to notify client of any drawing errors or loopholes in contract. Lim et al.(Lim and Loosemore 2017) 0.876 Cronbach’s CPB4 We will actively help participants who need to adapt to the construction environment. Anvuur et al.(Anvuur, Kumaraswamy, and 0.94 Alpha = 0.921 CPB5 We will actively put forward suggestions conducive to the construction of the project Asce 2012) 0.911 Richardson et al.(Richardson et al. 2021) 8 Q. LIN ET AL. Table 3. Correlation matrix and the square root of AVE of factors. Code RD RC TP FP CPB RL 0.849 RC 0.770 0.896 TP 0.576 0.575 0.886 FP 0.705 0.736 0.665 0.902 CPB 0.51 0.632 0.75 0.638 0.874 Note. Bold values on the diagonal represent the square root of AVE. Table 4. Cross loadings for individual measurement items. Code RL RC FP TP CPB RL1 0.864 0.645 0.545 0.632 0.401 RL2 0.81 0.538 0.394 0.514 0.399 RL 3 0.863 0.684 0.427 0.525 0.411 RL 4 0.859 0.727 0.56 0.693 0.509 RC1 0.678 0.866 0.544 0.706 0.577 RC2 0.692 0.914 0.495 0.613 0.552 RC3 0.697 0.907 0.501 0.654 0.568 TP1 0.441 0.399 0.844 0.546 0.555 TP2 0.524 0.508 0.901 0.634 0.655 TP3 0.572 0.548 0.927 0.633 0.675 TP4 0.495 0.561 0.872 0.545 0.751 FP1 0.684 0.718 0.616 0.9 0.569 FP2 0.629 0.684 0.618 0.912 0.623 FP3 0.62 0.625 0.578 0.902 0.569 FP4 0.609 0.624 0.586 0.894 0.536 CPB1 0.478 0.545 0.595 0.513 0.742 CPB2 0.501 0.609 0.679 0.591 0.886 CPB3 0.399 0.495 0.678 0.562 0.876 CPB4 0.443 0.566 0.683 0.588 0.94 CPB5 0.409 0.542 0.633 0.525 0.911 Table 5. Path coefficient and inspection results. Hypothesis Path Path coefficients T-statistics P value Inference H1a RL → CPB −0.171 1.364 0.173 Not support H1b RC → CPB 0.344 2.293 0.022 Supported H2a RL → TP 0.329 2.616 0.009 Supported H2b RC → TP 0.322 2.640 0.009 Supported H3a RL → TP → CPB 0.186 2.425 0.016 Supported H3b RC → TP → CPB 0.182 2.538 0.011 Supported H4a RL → FP 0.340 2.855 0.004 Supported H4b RC → FP 0.475 4.159 0.000 Supported H5a RL → FP → CPB 0.044 1.213 0.226 Not support H5b RC → FP → CPB 0.061 1.018 0.309 Not support Note. RL, risk liability; RC, risk compensation; CPB, consummate performance behavior; TP, trust perception; FP, fair perception. -0.171 Trust Perception Risk Liability (RL) (TP) 0.565 0.322 Consummate Performance Risk Allocation Behavior (CPB) 0.340 0.129 Risk Compensation Fair Perception (RC) (FP) 0.344 Figure 3. Graphical representation of path coefficient and inspection results. numerical analysis and the test standard of Bootstrap Secondly, the main effect test of risk liability and Method of mediating effect, H3a and H3b passed the fair perception was 0.340, P = 0.004 < 0.05; the hypothesis test, it could be seen that trust perception main effect test of risk compensation and fair per- plays a part in mediating between risk allocation and ception was 0.475, P = 0.000 < 0.05. So hypothesis contractor’s CPB. H4a and hypothesis H4b passed the test, and risk JOURNAL OF ASIAN ARCHITECTURE AND BUILDING ENGINEERING 9 allocation had a positive effect on the contractor’s 5.2. Mediating effect of trust perception perception of fairness. However, the contractor’s Hypotheses H2a and H2b passed the test, which perception of fairness had no significant impact proved that contract risk allocation has a positive on his performance. The hypothesis test of the impact on contractor’s trust perception. For the con- effect of fair perception on CPB was 0.129, sideration of efficiency and fairness, a client should P = 0.226 > 0.05. Therefore, hypothesis H5a and bear the risks within his own control scope and give H5b did not pass the test. This illustrated that fair the contractor reasonable risk compensation at the perception has no mediating effect between con- same time, which can reduce the risk management tract risk allocation and contractor’s CPB. cost of the contractor and improve the project perfor- mance. In construction projects, the contracting par- ties have established a sharing relationship based on 5. Results and discussion the economic incentives of the contract. However, the contracting parties are generally faced with an asym- 5.1. Contract risk allocation’s impact on metric trading situation, and the client setting up contractor’s CPB a reasonable risk allocation mechanism is to send The results showed that reasonable risk compensa- a good faith signal to the contractor. At the same tion can promote contractor’s CPB (H1b), which is time, due compensation is given to the contractor for in line with prior studies of Yan et al. (Yan Ling, Liu the state changes in the contract execution process, Liu, Zeng Cheng 2019; Ling et al. 2017), who have which shows the dynamic changes in the generation proved by situational experiments that reasonable and maintenance of trust between the two parties. risk compensation can guarantee contractor to get Hypotheses H3a and H3b passed the test, which corresponding compensation for the risks he bears showed that trust perception has a positive effect on and encourage the contractor to continuously contractor’s CPB. Trust perception provides motive improve the level of efforts and achieve good per- support for the mutual benefit and win–win relation- formance. This study obtained a similar conclusion ship between the parties. In a relationship of strong by developing a formal and explicit model and trust, contractor changes from short-sighted pursuit of empirically tested and generally confirmed. unilateral interests to pursuit of project value-added. Reasonable risk compensation emphasizes that The establishment of trust relationship reduces the the contract price signed by both parties is reason- anxiety of the contracting parties to the possible losses able compared with the risk borne by the contrac- of the other party, makes the distribution of rights, tor. It also means that when a contractor bears responsibilities, and interests more reasonable, and risks other than those preset in the contract due promotes the positive cooperative behavior of both to changes in the external environment, the con- parties. In the process of project implementation, con- tract should be provided with corresponding tractors should deepen the consideration of the overall adjustment measures, so that the contractor can benefits of the project, activate the power source of get corresponding reasonable profits and opportu- self-improvement, increase the investment in improv- nity benefits. ing the project performance, and actively take actions The results showed that contract risk liability has beyond the contract. no impact on contractor’s CPB (H1a). This is inconsis- Although risk liability has no direct effect on con- tent with Zhang et al. (Zhang, Zhang, Ying et al. 2016), tractor’s CPB, it indirectly promotes contractor’s CPB who find that it will induce contractor’s CPB when the after trust perception is added as a mediating variable. risk liability meets contractor’s expectation. The rea- This proves that trust perception plays a part- sonable risk liability mechanism reflects the fairness mediating role between risk allocation and contrac- of the transaction and shows the goodwill of the tor’s CPB, that is, the establishment of trust plays client to the contractor and the determination to a promoting role in the process of risk allocation affect - cooperate. From the contract reference point theory, ing contractor’s CPB. As a manifestation of reciprocal the efficiency of ex-post execution of the initial con- preference, trust perception eliminates contractors tract injected with reasonable risk liability depends on from taking opportunistic measures and increases contractor’s sense of entitlement. Specifically, if the additional motivation for CPB. Reasonable risk alloca- ex-post result is consistent with the expectation of tion scheme provides compensation for contract con- the contract reference point, contract risk liability can straint and contract state change, so client and stimulate contractor’s CPB. On the contrary, contrac- contractor can receive corresponding compensation. tors will only implement the minimum standards and It has also got rid of strict contract constraints and adopt perfunctory performance behavior, and may strong organizational control, providing a broad even cause the performance of the project to be space for contractors to create value-added contract agreements. The expected accumulation of long-term impaired. 10 Q. LIN ET AL. income leads to the formation of contractor’s CPB, 6. Conclusions and implications which explains why trust perception becomes Based on the contract reference point theory, this a mediating variable between risk allocation and con- study constructs a conceptual framework among risk tractor’s CPB. Reasonable risk allocation strategy allocation, trust perception, fair perception, and con- arouses the trust of contractor, and enhances contrac- tractor’s CPB. The empirical analysis through the data tor’s CPB. collected by questionnaire reveals the mechanism that contract risk allocation triggers contractor’s CPB. The 5.3. Mediating effect of fair perception study results enrich the contract reference point theory and provide the basis for client to design contract The results show that hypotheses H4a and H4b passed clauses that effectively encourage contractor’s CPB. the test, risk liability and risk compensation have posi- tive effects on contractor’s fair perception. Risk liability should be reasonable, too many risks cannot be trans- 6.1. Theoretical implications ferred to contractor (Zhichao et al. 2018). If the con- Compared with previous studies, the theoretical impli- tractor bears too many risks in the project cations of this study are the following two aspects: implementation process, even if his quotation includes First, a lot of the existing literatures believe that risk certain risk compensation fees, the contractor will still allocation scheme in contract will significantly affect suffer from serious unfairness due to taking too many contractor’s fair perception, the more reasonable the risks (Zhang, Zhang, Ying et al. 2016). Yin et al. (Yin contract risk allocation scheme is, the better the fair et al. 2020) reveal the impact path of reasonable risk perception of contractor will be. However, the conclu- allocation on project income from the perspective of sion of this study finds that only relying on contractor’s social capital, believing that reasonable risk allocation fair perception cannot induce contractor’s CPB. clauses can enhance the fair perception of contractors Attention should be paid to, but the role of fair percep- and promote cooperation between the two parties. tion of contractors should not be exaggerated. However, hypotheses H5a and H5b did not pass Second, previous studies on the incentive effect of the test, it showed that contractor’s fair perception contract risk allocation have mostly focused on how to has no significant impact on his CPB. The reason lies inhibit opportunistic behavior, without considering in two aspects: (1) contractor’s fair perception mainly whether contract risk allocation can encourage con- comes from the comparison between the return and tractors to choose a higher level of performance beha- the payment generated by the risk allocation and vior. This study reveals that construction project from the economic incentive of the contract risk contract risk allocation scheme needs to trigger con- allocation to contractor. From the perspective of tractor’s trust perception, so as to more effectively psychological perception, people are more likely to induce contractor to engage in CPB and truly play the accept upward adjustments than downward adjust- incentive effect of contract risk allocation. ments, that is, contractors are more sensitive to unreasonable risk allocation. The contractor will pre- set an anchor value for risk allocation at the initial 6.2. Managerial implications stage, which can be accepted. If a client formulates According to the conclusions of this study, combined a more stringent risk allocation scheme, resulting in with the specific situation of construction projects, the a deviation between the allocation of rights and following suggestions are put forward for contract responsibilities in the contract and contractor’s design guided by contractor’s CPB: expectation, the part lower than the expectation will be regarded as individual loss, thus the contrac- tor will feel a strong sense of unfairness and take 6.2.1. Improve contract risk allocation scheme so as opportunistic actions to punish the client. (2) The to provide health incentives for contractor’s CPB contract reference point theory proposed by Hart At the present stage of Chinese construction market, and Moore points out that the consummate perfor- due to the dominant position, client often distributes mance achieved by CPB is the basis of value-added most of the risks to contractor to reduce his own costs, benefit sharing (Hart and Moore 2008). The CPB is an resulting in unreasonable transfer of risks. This study altruistic act based on self-interest and also an has confirmed the incentive effect of reasonable risk altruistic act outside the role, including actively con- allocation on contractor, so it is necessary for client to trolling risks and making up the contract loopholes. further improve the rationality of the risk allocation The whole life cycle of the project and the complex- scheme in contract and to motivate contractor’s CPB. ity of the situation determine the diversity of con- Nonetheless, this study found that the economic tractor’s motivation for performing the contract. Only incentive generated by relying solely on risk allocation contractor’s fair perception can usually not motivate can induce contractor’s fair perception, but it cannot contractor’s CPB. necessarily stimulate his CPB. However, contractor’s JOURNAL OF ASIAN ARCHITECTURE AND BUILDING ENGINEERING 11 trust perception induced by the cooperative value Notes on contributors generated by contract risk allocation is part of the Qing Lin, doctor in management, senior consulting engineer, intermediary path to stimulate contractor’s CPB. Zonleon Construction Consulting Co., Ltd, Guangzhou Therefore, when formulating a risk allocation strategy, 510640, China. Email: 805060862@qq.com. the client should consider setting up an incentive Ling Yan, doctor in management, professor in Dept. of mechanism that matches the contractor’s trust percep- Construction Management, School of Management, Tianjin tion, so as to better induce contractor’s CPB. University of Technology, Tianjin 300384, China. Email: 444392566@qq.com. Yi-lin Yin, professor, School of Management, Tianjin 6.2.2. Establish a project management mode of University of Technology, Tianjin 300384, China. Email: yinyi- “mutual trust and cooperation” between client and lin575@163.com.Yi-lin Yin, professor, School of Management, contractor to provide continuous incentives for Tianjin University of Technology, Tianjin 300384, China. contractor’s CPB Email: yinyilin575@163.com. The current idea of construction contract designing still aims at the realization of perfunctory performance, Data availability statement which is obviously not conducive to the realization of the goal of engineering procurement construction All data, models, or code that support the findings of this aiming at inspiring contractor’s CPB and the value- study are available from the corresponding author upon reasonable request (444392566@qq.com). added of the project. This study proved that client’s designing of contract should not only pay attention to giving reasonable economic compensation to contrac- References tors, but also pay attention to improving contractor’s Abednego, M. P., and S. O. 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Journal

Journal of Asian Architecture and Building EngineeringTaylor & Francis

Published: Sep 3, 2023

Keywords: Risk allocation; consummate performance behavior (CPB); trust perception; fair perception

References