Mitigating the Transaction Costs of Project Subcontracting Management: The Heterogeneous Effect of Behavior Control and Outcome Control

Appropriate subcontracting strategy optimizes large-scale engineering project organization, enhancing implementation efficiency. However, numerous subcontractors increase the transaction costs of project subcontracting management. This study classifies subcontracting costs into coordination, monitoring, and negotiation costs based on transaction cost economics (TCE), and divides contractor management control into behavior and outcome control. This study aims to examine the causal mechanisms between subcontractor dispersion and the three types of transaction costs, plus the moderating effects of behavior and outcome control. Data is collected through a survey questionnaire and is analyzed by Partial Least Squares (PLS) analysis. Results show that the extent to which work is distributed among multiple subcontractors is positively related to transaction costs. Behavior control exercised by general contractors significantly suppresses the increase in transaction costs (especially the monitoring costs) resulting from subcontractor dispersion. However, outcome control does not exhibit a significant moderating effect on the relationship between subcontractor dispersion and transaction costs. The findings contribute to the theory of TCE and fill the gap in the research on the effective application of different management control modes. The findings help project managers choose an appropriate mode of management control to effectively manage subcontracting.