Impact of Contextual Variables on Effectiveness of Partnership Governance Mechanisms in Megaprojects: Case of Guanxi

Governance mechanisms are crucial to the success of joint-venture (JV) megaprojects. Although both contractual and relational governance mechanisms are studied to maximize cooperation and minimize opportunism, the relative effectiveness of each mechanism remains unclear, particular in JV megaprojects. Based on the transaction cost economics and relational exchange theory, this paper presents a case study of Chinese JV megaprojects to explore the impact of governance mechanisms in promoting cooperation and restraining opportunism. Specifically, this paper investigates how guanxi, as a contextual variable, affects effectiveness of different governance mechanisms when dealing with cooperation and opportunism in JV megaprojects. The analysis is based on data collected from 377 respondents. The findings suggest that guanxi plays an important role in affecting the effectiveness of partnership governance mechanisms in megaprojects. In the low guanxi scenario, both contractual and relational governance mechanisms effectively increase partner cooperation, and contractual governance mechanisms also help restrain opportunism. However, in the high guanxi scenario, only relational governance mechanisms play an effective role in resolving the JV social dilemma. Based on the findings, the authors offer theoretical and managerial implications for promoting the effectiveness of partnership governance mechanisms in Chinese megaprojects.