Effect of Contractual Complexity on Conflict in Construction Subcontracting: Moderating Roles of Contractual Enforcement and Organizational Culture Distance

Conflict mitigation is significant for project performance and sustainable relationships in construction subcontracting. The contract, whose design is often characterized by contractual complexity, is among the most important governance mechanisms influencing the behaviors of the general contractor and the subcontractor. However, inconsistent findings still exist in the relationship between contractual complexity (i.e., the explicitness and elaborateness of a contract) and conflict in terms of whether the relationship is “positive” or “negative.” To revisit the relationship in the construction subcontracting context, this study adopts a transaction governance perspective and focuses on the effects of formal rules (reflected as contractual complexity and contractual enforcement) and informal rules (reflected as organizational culture) to propose a research framework. To test the framework, the authors conducted a questionnaire survey, receiving 270 quantitative responses from general contractors and subcontractors. The results show that contractual complexity has U-shaped relationships with task conflict and relationship conflict, respectively. The optimal degrees of contractual complexity for reducing task conflict and relationship conflict are within the moderate range. The increase in contractual enforcement strengthens the curvilinearity of the relationship between contractual complexity and task conflict and moves the optimal degree of contractual complexity to the left. The increase in organizational culture distance weakens the curvilinearity of the respective relationships between contractual complexity and task conflict and relationship conflict, and moves the optimal degrees of contractual complexity to the right. This study contributes to the literature on conflict and transaction governance, and also helps general contractors and subcontractors draft contracts with the optimal degree of complexity for conflict mitigation according to their contractual enforcement and organizational culture distance.