The efficacy of trust for the governance of uncertainty and opportunism in megaprojects: The moderating role of contractual control

The low success rate of megaprojects stems from the opportunism triggered by uncertainty. Developing trust between participants is an effective means to reduce uncertainty, but this process is inevitably affected by contracts. The purpose of this paper is to examine the impact of uncertainty on participants’ opportunism in megaprojects and the effect of trust on reducing uncertainty. At the same time, the moderating effects of contractual control are tested.

This research classifies trust into competence-based trust and goodwill-based trust and categorizes uncertainty into environmental uncertainty and behavioral uncertainty. Partial least squares structural equation modeling is used to test the hypotheses based on data collected from 172 respondents.

The results show a positive correlation between the two types of uncertainty and opportunism. For the governance of uncertainty, competence-based trust can reduce environmental uncertainty, but it is ineffective for behavioral uncertainty, and goodwill-based trust has a significant effect on both types of uncertainty. The test of moderating effects shows that contractual control strengthens the effect of competence-based trust but weakens the effect of goodwill-based trust, which means that contractual control complements competence-based trust and substitutes for goodwill-based trust.

This research enriches the theory of megaproject management. First, it validates the role of competence-based trust and goodwill-based trust in reducing the different types of uncertainty in megaprojects. Second, this study clarifies the substitution or complementarity between contractual control and different dimensions of trust in the context of high uncertainty, which provides a comprehensive answer to prior research inconsistencies on contractual control and trust.

For practice, this research provides some implications for megaproject management. First, project managers should recognize that the match between trust and project uncertainty is key to the success of megaproject governance. For example, some megaprojects involve many organizations, and there are many difficulties in behavioral supervision and performance appraisal. Therefore, developing goodwill-based trust between participants through positive interactions is an effective means to reduce the behavioral uncertainty of all participants and to curb opportunistic behaviors.

This research validated the role of competence-based trust and goodwill-based trust in reducing the different types of uncertainty in megaprojects. Furthermore, it clarifies the substitution or complementarity between contractual control and different dimensions of trust in the context of high uncertainty, which provides a comprehensive answer to prior research inconsistencies on contractual control and trust.