Understanding subcontracting organizational arrangements for construction projects in China: Integrating capabilities and uncertainty

Purpose: Chinese construction projects commonly implement subcontracting, but organizational arrangements have received little attention. Some studies have debated the impact of firm capabilities on subcontracting. To address these issues, this study differentiates the general contractor’s technological capabilities and alliance management capabilities and investigates how capabilities affect the degree of subcontracting and subcontracting dispersion based on the resource-based view and transaction cost economics. Design/methodology/approach: By conducting a survey, 219 valid questionnaires were collected from Chinese construction companies. Multiple regression analyses were conducted to test the influence of capabilities on subcontracting organizational arrangements and the moderating role of uncertainty. Findings: The results show that technological capabilities decrease the degree of subcontracting, whereas alliance management capabilities increase the degree of subcontracting as well as subcontracting dispersion. The results also indicate that the positive effects of alliance management capabilities are weakened by project uncertainty. Practical implications: This study provides a better understanding of the diversity of subcontracting organizational arrangements in China. In addition, the findings may help general contractors carry out a rational arrangement by considering their capabilities and transaction hazards. Originality/value: This study contributes to a holistic understanding of how capabilities determine subcontracting by distinguishing technological capabilities and alliance management capabilities and refining the degree of subcontracting and subcontracting dispersion. Meanwhile, the findings highlight the complementarity of the resource-based view and transaction cost economics by examining the moderating effect of uncertainty.