FORMAL GOVERNANCE MECHANISM AND ITS APPLICATION IN CONSTRUCTION PROJECTS

Inter-organizational Relationships (IORs) governance is one of the emerging research areas that have been studied in different contexts (e.g. economics, strategy, organization, and management). This view, particularly, attracted rising attention from academics and practitioners in the context of construction projects, due to the complex forms of IORs in terms of inter-firm exchanges (e.g. engineering, procurement, finance, construction, and operation) in these projects. The focus of IORs governance is to control Inter-organizational relationships among two or more cooperative parties to alleviate conflict and achieve mutual gains. One of the mechanisms that have been identified in the related literature is formal governance mechanism. Although many empirical studies have been conducted using formal governance terms and indicators, there isn't yet a consensual definition of this mechanism and its components that may cause misinterpretation of research results and also impede future research. This paper makes contribution to the concept of IORs governance by clarifying the meaning of formal governance mechanism and identifying different indicators of this mechanism that have been used and identified in previous studies. This provides an innovative and useful framework to understand formal governance mechanism and its application in construction projects.