Keywords

1 Introduction

Zeiss (2007) summarized five major challenges facing the construction industry: (1) global climate change; (2) aging infrastructure; (3) shrinking workforce; (4) declining productivity and (5) islands of information. The ability to adapt to the dynamic environment is therefore vitally needed to overcome challenges and to innovate (Flyvberg, 2017; Cheung and Chan, 2014). Comparatively, mega projects have high asset specificity and require multiparty participation. Relational risks in buyer‒seller relationships are recognized by agency theory, which are aggravated by the complexity and uncertainty of mega projects (Bryde et al., 2019). A noncooperative attitude is an important factor hindering project performance (PP hereafter). Moreover, the construction project team would dissolve upon completion of the project. Therefore, long-term benefits are seldom considered by team members (Suprapto et al., 2016). Opportunistic behavior occurs during the construction stage, which is not conducive to collaboration and promotes disputes (Zhang et al., 2020a, 2020b). Effective moves to enhance interorganizational relationships (IORs hereafter) and alleviate the related bottlenecks are therefore advocated.

What vehicle can be deployed to develop IORs? Williamson (1979) pointed out that contract incompleteness is unavoidable in complex, long-term transactions. Therefore, convergent contractual governance is inadequate (Nguyen & Garvin, 2019). The potential use of construction incentivization (CI hereafter) to address risks identified ex post has been suggested in Chapter 1. In fact, the flexibility and high acceptability of CI make it important and adequate to address project challenges (Meng, 2015). Furthermore, the case study of the Hong Kong-Zhuhai-Macao Bridge Project found that CI can serve the function of IOR maintenance by enhancing information exchange (Zhu et al., 2020). An integrated incentive system was also found to help the developer obtain additional project updates and enhance interorganizational communication. Jelodar et al. (2016) further added that incentives are instrumental in enhancing the quality of project teamwork, as evidenced by team members’ commitment and collaboration. Investigating the use of CI on IORs is a valuable organizational study. Accordingly, this chapter reports a study that systematically examines the use of CI in mega projects to develop IORs for project performance improvement. The findings of this study suggest that the innovative planning of CI should embrace developing IORs, as put forward by the relevant theories. This study has the following research objectives:

  1. (1)

    Identify IORs in mega projects;

  2. (2)

    Analyze the functions of construction incentivization in mega project management; and

  3. (3)

    Provide practical recommendations for construction incentivization planning.

2 Interorganizational Relationships in Construction Projects

Interorganizational relationships are the foundation of enduring bonding among organizations (Oliver, 1990). Recent literature focuses mainly on aligning mutual interests among project participants (Cropper et al., 2008; Manata et al., 2021). The value of collaboration and cooperation has gradually received attention.

2.1 The Developer-Contractor Interorganizational Relationship

The developer-contractor tensed relationship is commonly observed in construction projects. Based on principal-agent theory (Eisenhardt, 1989), the principal refers to the developer when the agent is the contractor. Cooperation and coordination are usually assumed among project participants. Based on principal-agent theory, different commercial organizations’ behavior is driven by their self-interest. In addition, there are distinct aspects of this relationship because of the nature of construction projects. Compared with other projects, the particularity of a construction project is as follows:

  1. (1)

    Construction project teams are often identified as temporary organizations (Cropper et al., 2008). Different from the buyer‒seller relationship, construction projects exist for a limited period for prespecified goals. Project participants are commonly unfamiliar and self-interested. Opportunistic behavior may happen during the project.

  2. (2)

    Mega projects often have high asset specificity. Asset specificity refers to durable investments undertaken for transactions. Should the original transaction be prematurely terminated, the opportunity cost incurred for investments is much lower in best alternative uses or by alternative users (Williamson, 1985). If the mega project is not finished, project stage results are irreversible and difficult to utilize. In that case, great loss may result if contract determination happens, especially in the middle or later stage of the project. Transaction cost economics (Williamson, 1979) therefore argues that the specific assets invested in a partnership increase the hazards of opportunism. Relational exchange theory suggests that asset specificity may also enhance trust among contracting partners and lead to more cooperative behavior and higher project performance (Lui et al., 2009). However, in either case, asset specificity affects both the status change and power use of both parties.

2.2 Key Dimensions of the Interorganizational Relationships in Construction

The interorganizational relationship captures the construction project team quality and the dynamic exchange between parties (Song et al., 2020). Zhu and Cheung (2022) identified six dimensions of interorganizational relationships, of which interdependency (Cropper et al., 2008; Fu et al., 2015; Cheung et al., 2018), trust (Cheung et al., 2014), reciprocity (Oliver, 1990) and relationship continuity are considered in this study (Güth et al., 2000; Macneil, 1974).

  1. (1)

    Interdependency: The three subdimensions of interdependence are uncertainty, asset specificity, and frequency (Williamson, 1985). A ‘lock-in’ situation occurs when asset-specific investments are made by contractual parties (Williamson, 1979). Interdependence between developers and contractors is also realized when parties perceive that high termination costs are associated with ending the relationship (Sarkar et al., 1998). For construction projects, asset-specific investment substantially increases once projects reach milestones. Project participants thus rely heavily on each other, and the termination of construction contacts or a change in partners may cause significant losses (Guo et al., 2021). Relational exchange theory highlights that interdependency is the pillar of interorganizational cooperation (Kumaraswamy & Anvuur, 2008). After investigating 142 construction projects, Cheung et al. (2018) found that cooperative behavior would be created for contractual parties with high interdependency.

  2. (2)

    Reciprocity: Reciprocity in construction projects occurs when project participants provide necessary assistance to each other, resulting in a win‒win situation. It is one of the bases upon which interorganizational relationships develop (Oliver, 1990). Human altruistic instinct acts as a powerful force to drive people to cooperate rather than confront each other (Fehr & Fischbacher, 2003). Creating a cooperative working environment is also an essential adversarial strategy (Bower et al., 2002). Reciprocity contributes to project collaboration and coordination among project participants (Wang et al., 2019) and is the basis of trust building (Swärd, 2016). A positive relational attitude of reciprocity among team members is beneficial for project efficiency (Suprapto et al., 2016).

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    Trust: Trust is the foundation of social order (Cheung et al., 2014) and the compensation for contractual control (Zhang et al., 2018). It takes time to develop and maintain mutual trust and major unresolved conflict can destroy trust in a relationship (Ceric, 2016). Mistrust is a potential factor that aggravates speculation and hostility. The evaluation of trust is always a key element of IORs. Cheung et al. (2011) identified three major types of trust in construction contracting: (1) system-based trust; (2) cognition-based trust; and (3) affect-based trust. System-based trust is trust in the performance of systemized open communication. Such arrangements can build trust through strengthened communication among contracting parties. Cognition-based trust develops from confidence in objective knowledge that demonstrates the trustworthiness of the contracting parties. The exchange of such knowledge can be attained through interaction or observation. Affect-based trust develops on a more sentimental platform and involves emotional bonds that connect individuals who value personal attachment.

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    Relationship Continuity: Relationship stability and continuity are important for IOR long-term development. It has two dimensions: (1) for a specific construction project, the parties involved must be able to fulfill their obligations to ensure the stability of the relationship for a significant period, and (2) both parties must intend to maintain their cooperative relationship over the long term (Bock et al., 2005). This dimension shows that project participants are changing their focus from short-term gain and loss to long-term benefits. In this context, they are also willing to sacrifice short-term interests to obtain more long-term win‒win and benefit opportunities. On the other hand, the stability of their cross-organizational relationship improves. Examples include developing partnerships and creating long-term strategic cooperation opportunities.

3 Relationship Investment from Construction Incentivization

It is proposed that CI can be used to develop IORs to enhance PP. This section first discusses the constructs of CI and PP and then formulates the hypothesized relationships.

3.1 Identification of Construction Incentivization

CI refers to the collective terms of incentive schemes applied in construction projects. The main purpose of incentivization is to motivate project participants and obtain more value than expected (Meng & Gallagher, 2012a, 2012b). CI can be classified based on objective objectives such as cost, schedule, quality, and safety incentive schemes. Based on the nature of the rewards, it can also be divided into financial and nonfinancial incentive schemes (Saka et al., 2021). The underlying needs of the developer and the motivations of the contractor are pivotal and central to CI. To exemplify the four CI design parameters introduced in Chapter One, Zhu and Cheung (2021a) identified that effective CI has the following features: (i) goal commitment (Locke et al., 1988); (ii) expectation alignment (Wigfield & Eccles, 2002); iii) information exchangeability (Bryde et al., 2019; Laffont & Tirole, 1988); iv) risk efficiency (Boukendour & Hughes, 2014); and v) relationship investment (Adams, 1963).

  1. (1)

    Goal Commitment: The mutual commitment of additional project goals is commonly manifested in CI. It reflects the performer’s willingness to cooperate regardless of the difficulty, originality, or credibility of the assigning party (Zhu & Cheung, 2018). For construction projects, CI targets should be agreed upon by contracting parties (Rowlinson, 2012). Extra effort directed toward CI targets for working together should also be clarified (Rose & Manley, 2011). The incentives and rewards are related to the achievable project targets (Locke and Latham, 1990), and extra effort is necessary to fulfill these goals when difficulties arise.

  2. (2)

    Expectation Alignment: The alignment of goals and expectations is essential in CI planning. Abu-Hijleh and Ibbs (1989) noted that CI targets should be attractive, affordable, and achievable to contractors. For example, financial incentives take effect by compensating the additional effort that a higher return may require. Bridging a project vision can also be a subjective benefit. Bandura’s (1982) self-efficacy theory explains that the confidence between two parties underpins the desire for project success. Moreover, the expectation level also influences contracting behavior and the performance of contract commitments (Blomquist et al., 2016). An appropriate and similar level of confidence should be developed for contractual parties through CI to enhance cooperation and manifest commitment (Das and Teng, 1998).

  3. (3)

    Information Exchangeability: Information exchangeability holds that an additional information sharing system should be established for CI implementation. For schedule incentives, additional milestones are often set, and rewards are offered. The project procedure is thus more exposed for the developer and helps reduce information asymmetry to solve the agent problem (Schieg, 2008). For mega projects, integrated information sharing systems are established together with performance assessment systems to confer rewards or otherwise (Zhu et al., 2020). Based on the outcome, transaction uncertainty could be reduced. Screening refers to the means for the developer to collect project information for specific tasks (Cropper et al., 2008). As specific tasks are mentioned and additional information sharing platforms are often incorporated, settings relating to communication enrich information exchange, which in turn facilitates project progress and quality control (Hetemi et al., 2020).

  4. (4)

    Risk Efficiency: Imbalanced risk allocation is a root cause of construction disputes (Zhu and Cheung, 2020). Risk reallocation is a key ammunition of CI (Chapman & Ward, 2008). Risk efficiency refers to the balanced risk toward project efficiency (Zhang et al., 2016) and aligns the risk preferences of stakeholders (Zou & Zhang, 2009). Risk reallocation therefore aims to reduce excessive risk premiums and minimize future construction disputes. Moreover, a fair and efficient risk sharing formula would incentivize contractors by removing suspicion and fostering trust (Boukendour & Hughes, 2014). Innovation is also encouraged when project risks are better allocated and more freedom is allowed (Zou & Zhang, 2009).

  5. (5)

    Relationship Investment: Relationship investment refers to the motivational and relational move from a power-advantaged party to the invited reciprocation of support and trust. The contracting relationship is promoted to pursue mutual project benefits (Cook & Emerson, 1978). Status recognition is used to offer better recognition of the weaker party and enhance the other party’s project engagement (Adams, 1965). Strategic alliances and partnering are also considered incentives for collaboration (Richmond-Coggan, 2001). They both aim to encourage contractors to focus on long-term returns. Their status changes from performance unit to strategic partner, which also improves their trust and participation.

3.2 Project Performance

Project performance (PP hereafter) represents the project outcomes. Multiple dimensions are therefore used due to the many facets of project results (Ahmadi Digehsara et al., 2018). Eisenhardt (1988) argued that performance measured by target outcomes is appropriate for highly programmable tasks only. Moreover, mega projects are often highly complex with low task programmability. Behavior-based criteria are thus necessary to provide a full spectrum of performance. In addition, innovation is also encouraged and cannot be evaluated by programmable tasks (Zhang et al., 2020a, 2020b). The evaluation of project performance thus includes (i) project outcomes in terms of cost, schedule, quality, and safety (Yu et al., 2005); (ii) behavioral outcomes such as joint problem solving and communication (Eisenhardt, 1989; Zhang et al., 2020a, 2020b); and (iii) innovation (technical and managerial) (Dulaimi et al., 2003).

3.3 The Relationships Among CI, IOR and PP

  1. (1)

    Effective CI enhances PP improvement

Based on principal-agent theory, the use of CI helps reduce project uncertainty and make more transparent decisions (Zhu & Cheung, 2021b). For example, developers set the incentive of the benefit-sharing ratio to encourage cost savings. For this purpose, an open-book approach is adopted, along with enhanced project information sharing. Observability is therefore increased. Work segregation can also reduce the indeterminacy of other parties (Hosseinian, 2016). Likewise, schedule incentives are set with specific milestones (Wang et al., 2018). Information asymmetry between principal and agent can be reduced by enhancing task measurability (Holmstrom, 1979). In addition, more balanced risks can encourage contracting parties to adopt innovative ideas (Bower et al., 2002).

  1. (2)

    IOR mediates the relationship between CI and PP

Apart from the effectiveness of CI based on principal-agent theory, relevant studies point to the multifunction of CI instead of using it solely as financial bait. Rose and Manley (2011) found the importance of providing incentives when cooperation is solicited. IORs thus can be incentivized (Oliver, 1990; Cropper et al., 2008; Kwawu & Laryea, 2014). Incentivization can kickstart IOR development. The different aspects of CI, such as goal commitment, risk allocation and relationship investment, have been found to be essential motivational factors for developing trust (Gunduz & Abdi, 2020). Reallocation of risk perceptions is also beneficial to reinforce trust at the organizational level based on rational pursuit (Yao et al., 2019). With improved IOR, mutual trust can be enhanced with the effect of suppressing opportunistic behavior (Ceric, 2016), raising operational efficiency (Liu et al., 2017) and minimizing construction disputes (Zhu & Cheung, 2020). Enhanced IOR is also instrumental for PP improvement. Collaboration and cooperation are promoted in construction projects, as they are conducive to improving project efficiency (Gunduz & Abdi, 2020). The enhanced relationship reduces the risk premium caused by mistrust during the project procedure and minimizes transaction costs (Kumaraswamy & Anvuur, 2008).

Based on the literature, the relationships of these three factors are like the mediation effect. Figure 1 presents the conceptual relationships of CI, IOR and PP. IOR acts as a mediator between CI and PP:

Fig. 1
A diagram is in the form of a triangle with I O R at the apex. C I at the bottom left leads to I O R, then to P P. C I also directly leads to P P at the bottom right.

The conceptual relationships among CI, IOR and PP

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4 Empirical Study

An online questionnaire was designed to verify the conceptual framework. Construction professionals from the Hong Kong Institute of Architects (HKIA), the Hong Kong Institute of Surveyors (HKIS), the Hong Kong Institute of Construction Managers (HKICM), listed real estate companies and contracting companies located in Hong Kong were invited to participate. The questionnaire focuses on personal particulars (Part 1), the participating project details of CI (Part 2), and the three constructs (Part 3–5). A 7-point Likert scale ranging from 1 (strongly disagree) to 7 (strongly agree) was used to capture the respondents’ viewpoints. To obtain valid data, responses with unreasonable filling times were excluded.

The data were analyzed with confirmatory factor analysis (Hair et al., 2010). Partial least squares-structural equation modeling (PLS-SEM hereafter) was applied considering the sample size and the distribution of data (Hair et al., 2014; Henseler et al., 2009). Smart PLS 3 was used to estimate the measurement models and the mediating effect of the key constructs. A hierarchical component model (HCM) is applied for the measurement model of CI, IOR and PP. The mediating effect of IOR was tested based on PLS-SEM. A multigroup analysis (MGA hereafter) was applied. A heterogeneity test was also conducted to check group differences in project roles (the developer/contractor) and the contractual role of CI (CI initiator/recipient).

Over 450 questionnaires were distributed online, and 142 valid responses were obtained. For Part 1, Table 1 presents the personal particulars of these professionals. The table shows that the ratio of management staff and professional staff in this investigation is 1:2. Work experience was basically evenly distributed among these four groups.

Table 1 Personal particulars (Part A)
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Part B investigates the project details incorporating CI. The contractual and organizational roles were investigated. Table 2 presents the cross-check relationship between the organizational role and contractual role of CI:

Table 2 The relationship between the organizational role and the contractual role in CI
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Most CI was planned and implemented by developers, and contractors were the primary recipients. Among the 73 developer respondents, only 5 have project experience as recipients of CI. To summarize, 79% (68 responses) of the CI projects investigated were initiated by the developer, and only 21% (18 responses) were initiated by the contractor.

Table 3 presents the details of the projects investigated.

Table 3 Project details
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There is a generally even distribution of the project nature, and half of the projects are private projects. Twenty-eight percent of the projects are government projects, and 15% are institutional projects. To obtain a detailed view of the distribution by project nature, a cross check was performed based on these two questions.

Table 4 shows the data for Parts 3–5 of the survey.

Table 4 Descriptive statistics for Parts 3–5 of the survey
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The descriptive data for Parts 3–5 are shown in Table 4. For the setting of CI (Part 3), the average scores of most responses are above 4 (neutral), and most of them are higher than 5 (slightly agree). This result shows that these key features are reflected during the project procedure. The highest mean score was obtained for Q3.4 (The expected performance was considered achievable for project participants) (5.80) and Q3.1 (Incentive plans applied common goals set by the contracting parties) (5.76). The standard deviations of these two items are 0.84 and 0.83, respectively. The lowest mean score is Q3.9 (The project participants’ unobserved behavior was monitored under CI) (4.84), showing that the CI function of information exposure is comparatively less effective.

The mean scores for most questions regarding IOR are all above 5 (slightly agree). This result shows that a satisfying level of IOR is maintained under CI. The lowest score is Q4.3 (Misunderstandings were avoided through open communication) (4.30). The respondents agreed that IORs were sufficiently maintained in these two areas. Responses with the highest mean scores are related to trust building.

The mean scores of the questions in Part 5 section (Project Performance) are all above 5. Comparatively, all the behavior outcomes have the most satisfying responses, i.e., above 5. For the hard outcome, Q5.7 (This project achieved a satisfactory level of project quality) has the highest mean score. Comparatively, CI created less innovative value for the overall project.

A collinearity test is conducted to identify and eliminate redundant or conflicting variables (Hair et al., 2010). As collinearity impacts the accuracy of the PLS-SEM analysis, redundant or conflicting indicators should be removed based on Pearson’s correlation test (Hair et al., 2014). Based on the test result, Cronbach’s alpha (α) is also calculated to check internal consistency. A threshold of 0.6 has been proposed (Davcik, 2014).

PLS-SEM Analysis

To evaluate internal consistency and convergent validity, composite reliability tests and average variance extracted (AVE) tests are suggested for PLS-SEM analysis (Davcik, 2014; Hair et al., 2014). An AVE value higher than 0.4 is adequate when the composite reliability level is higher than 0.6 (Fornell & Laecker, 1981). Table 5 shows the composite reliability and AVE of the constructs in this study.

Table 5 Composite reliability and average variance extracted (AVE)
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Based on the acceptance of the indices, Fig. 2 shows the PLS-SEM analysis results. Generally, all the coefficients are significant at the 5% level:

Fig. 2
An illustration has a triangular framework at the center, with I O R at the apex, C I and P P at the bottom left and right, respectively. C I has 5 divisions. I O R has 4 divisions. P P has 3 divisions. Each division has a label and values assigned to it.

PLS-SEM analysis result of the framework

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Figure 2 presents the analysis results of the empirical study. For each factor, the following is found. (1) For CI, risk efficiency contributes the most (0.870), while information exchangeability contributes the least (0.791) at the 5% significance level. (2) For IOR, trust has the highest contributing value of 0.969, and interdependency has the lowest. 3) For PP, behavior outcome contributes the most (0.939), while innovation contributes the least (0.692).

The relationships of CI, IOR and PP are also analyzed and validated. Partial mediation means that there is not only a significant relationship between the mediator and the dependent variable but also a direct relationship (e.g., CI and PP). Statistically, the result shows that IOR acts as a partial mediator between CI and PP. The positive relationship between CI and PP is validated, and the coefficient is 0.349. The indirect effect of CI on PP is 0.355 (0.782*0.454 = 0.355), accounting for approximately 50% of the total effect.

SmartPLS3 presents the model fit indices. The R2 value is the most used measure to evaluate a model’s predictive accuracy (Hair et al., 2014). Table 6 shows the R2 value of the conceptual framework. As R2 and adjusted R2 values greater than 0.10 are acceptable (Falk & Miller, 1992),the accuracy of the framework is validated.

Table 6 R2 value
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Table 7 shows the effect size f2 and Stone-Geisser’s Q2 values.

Table 7 Effect size f2 and Q2 values
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In PLS-SEM analysis, the effective size f2 was examined to evaluate the R2 values of all endogenous constructs (Hair et al., 2014). For the measurement model, the most effective size f2 in Table 7 is higher than 0.35, showing that they have large effects (Cohen, 1988). Interdependency has a moderate effect, as the value is higher than 0.15 (Cohen, 1988). The blindfolding procedure is also conducted to assess the Q2 value. The smaller the difference between the predicted and original values is, the greater the Q2 value is (Ringle et al., 2018). Table 7 shows that all the Q2 values are higher than 0.02, which is acceptable, and those higher than 0.35 are considered to have a high effect.

Group differences were also tested by heterogeneity tests to highlight further implications. Views of the developer and contractor, CI initiator and CI recipient were analyzed. Tables 8 and 9 show the group differences.

Table 8 Group differences between developers and contractors
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Table 9 Group differences between CI initiators and recipients
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Table 8 shows that contractors tend to hold a view that CI has a greater effect on information exchange but a slightly lower effect on risk efficiency. Additionally, a stronger connection between CI and IOR is found from the developer’s view. Table 9 shows the differences between the CI initiator and the recipient. Similarly, the significance of the difference is also reflected in the contributing value of information exchangeability. Moreover, CI recipients recognize the value more of aligning the expectation of two parties.

5 Discussion and Recommendations

The PLS-SEM analysis empirically validates the hypothesis with 142 responses. Bootstrapping with 5000 samples is adopted, and all the coefficients are significant at the 5% level. It is found that IORs and CI are instrumental for behavior-based project performance improvement. The overall contractual framework also implies that IORs play a mediating role between CI and PP. The results also validate this finding.

The results also show that singular financial rewards are beneficial for project performance enhancement; moreover, relationship investment also improves behavior-based project performance. The focus should be incentivizing relationship investment to engender mutual trust and cooperation. For the heterogeneity test, group differences were detected. Differences were found between developer and contractor. Information exchangeability tends to have a lower contributing value toward CI for developers. As most CI initiators are developers, this difference is also reflected between the CI initiator and recipient. Additionally, the investigation shows that most CI projects are introduced unilaterally. Developers have greater interest in building IORs through CI, which has a less positive effect on recipients in nurturing trust and developing relationship continuity.

Based on both theoretical development and empirical study, recommendations for management are as follows:

  1. (1)

    CI should be treated as a stimulator of IOR development.

Conventional studies of CI have focused mainly on the use of CI to compensate for the extra effort it may cost to improve performance. This study further found that to improve PP, CI should act as a stimulator of IOR development. Different from the traditional concept, relationship investment is found to be the most significant contributor to CI planning, which is less relevant to monetary rewards. Apart from financial incentives, status recognition (partnership) and long-term working opportunities are the sweetener for the contractor to cooperate and maximize project value. Moreover, IOR is the partial mediator between CI and PP. The CI-IOR-PP relationship takes half (0.782*0.454 = 0355) of the total effect (0.355 + 0.349 = 0.704), representing the key position of IOR in the relationship between CI and PP. For CI design, in the design of incentive mechanisms, the proportion of terms for maintaining IOR deserves project managers’ attention.

  1. (2)

    Bilateral decisions should be the basis of CI planning

Another major finding is the differential viewpoints of CI between developer and contractor. The major differences concern the recognition of CI. Developers (most are CI initiators) usually have higher expectations regarding information exchangeability and risk efficiency. However, as the agent, the attitude of the CI recipient is more directly linked to its effect on PP. Bilateral discussion is thus encouraged for the implementation of CI. Negotiating the allocation of risk and expected return promotes the success of CI.

6 Summary of Chapter

Mega projects are classic examples of transactions with high asset specificity and multiparty participation. Relational risks in the buyer‒seller relationship is recognized by agency theory. The complexity and uncertainty surrounding mega projects necessitate the use of relationship investment to lubricate the potential working bottlenecks. The flexibility and high acceptability of CI make it a perfect tool to meet project challenges. It is advocated that CI can play a pivotal role in delivering PP through IOR building. This study examines the stimulating effect of CI on IOR development in mega projects. Based on a literature review, the key contributors of IORs are identified as interdependency, trust, reciprocity, and relationship continuity. Goal commitment, risk efficiency, relationship investment, information exchangeability and expectation alignment are essential elements of successful CI. After subjecting 142 project data to PLS-SEM analysis, the IOR was found to be a partial mediator between CI and PP. Accordingly, it is recommended that (1) CI should be treated as a stimulator of IOR development and (2) bilateral decisions should be the basis of CI planning.