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Transaction-Cost-Based Selection of Appropriate General Contractor-Subcontractor Relationship Type

Cited 16 time in Web of Science Cited 23 time in Scopus
Issue Date
2009-11
Publisher
ASCE-AMER SOC CIVIL ENGINEERS
Citation
JOURNAL OF CONSTRUCTION ENGINEERING AND MANAGEMENT-ASCE; Vol.135, No.11, pp.1232-1240
Abstract
Relationships between general contractors and subcontractors are generally formed on a project-by-project basis. However, because of the competitive nature of the construction industry, this traditional arrangement can result in adversarial relationships between general contractors and subcontractors, which can jeopardize potential or ongoing collaborative construction plans. To avoid this problem, close, long-term relationships between general contractors and subcontractors, as in strategic partnerships, must be established. Unfortunately, forming and sustaining such relationships can be time-consuming and cost-intensive. Furthermore, this type of relationship does not necessarily enhance cooperation or work performance. For contractors to successfully establish effective partnerships with their subcontractors, they must select the appropriate relationship by considering the different characteristics of the subcontracted work involved. Based on transaction cost theory, the findings of this study show that transaction costs incurred by general contractors and subcontractors vary according to the type of relationship established. Therefore, for the purpose of comparing transaction costs incurred in both competitive and partnership relationships, transaction-cost-based profit models for both general contractors and subcontractors are developed, respectively, for each relationship type. As well, by applying different strategies to maximize profits in each relationship, and by simulating the parameters affecting the nature of the subcontracted work, the conditions and relationships under which general contractors` profits are optimized have been determined. Finally, based on simulation, practical guidelines for choosing the most appropriate relationship type are proposed.
ISSN
0733-9364
Language
English
URI
https://hdl.handle.net/10371/80912
DOI
https://doi.org/10.1061/(ASCE)CO.1943-7862.0000086
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College of Engineering/Engineering Practice School (공과대학/대학원)Dept. of Architecture and Architectural Engineering (건축학과)Journal Papers (저널논문_건축학과)
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