The inter-organizational relationship in a multi-contractor business network

Abstract

Purpose – The purpose of this paper is to present a study on the relationship between the client and the contractor in a multi-contractor business network. Design/methodology/approach – A model built on transaction cost economics and relational exchange theory is proposed to determine the preferred governance mechanism as a function of fit with the technical environment of facilities management. Hypotheses in the model are tested by means of data collected from a survey of facilities managers. Findings – It is found that decision making uncertainty has a negative effect on relational norm. On the other hand, a positive relationship exists between asset specificity and relational norm, and this relationship is moderated by risk of malfunction. Research limitations/implications – As trust and relational norm may be affected by the local culture, validation of the study may be necessary in other cultural settings. Practical implications – By means of the empirical model, the gap between the current relational norm and the desired relational norm can be determined. With this knowledge, the facilities manager of the client can then plan change initiatives to narrow the gap. Originality/value – The developed regression equation facilitates objective determination of the preferred relational norm between the client and the contractor in the context of maintenance out-tasking.