Coordination in Contractual Relations: Some Preliminary Findings from the Malaysian Housing Industry

Abstract

The traditional general procurement route found in many housing projects in Malaysia is conceptualized as a governance structure following the transaction cost economics (TCE) approach. This approach has been used to examine governance structures in different economic sectors in several countries but evidence of its use in the context of developing countries is limited. This lack of evidence has prompted the authors to cond uct a preliminary study to ascertain whether a TCE approach can explain construction governance structures in developing countries. This research
does not discuss the trade-off that governs the choice of hybrids, market or hierarchies for organizing transactions. Rather, it takes advantage of existing research to substantiate the specific properties of hybrid organizations as governance structures. The main focus is coordination. Coordination is specified at two levels. At Level 1 is the coordination of specialization (i.e. the formation of the project team members) and at Level 2 is the coordination mode of the contracting parties (client and contractor) and the agents involved (the lead designer and project manager). A case survey method was adopted. Preliminary findings seem to suggest that clients have used hierarchical themes in the contracts and high powered incentives to coordinate with in the contracting parties. The research findings suggest that all participants involved in the sample studied used governance structures symptomatic of a hybrid organization.
Keywords: transaction cost economics, pro curement, governance structures, hybrid organizations, coordination.