Impact of Institutional Environment on Construction Disputes: Considering the Mediating Roles of Contract Governance and Relational Governance

Abstract Construction disputes, as a prevalent issue in the construction industry, not only cause significant losses for both parties involved but also hinder the sustainable development of the sector. To effectively prevent and resolve construction disputes and mitigate the associated losses, a governance model for construction disputes has been developed. A total of 643 questionnaires were collected and analyzed using the partial least squares structural equation modeling (PLS-SEM) method to examine the effects of the institutional environment, contract governance, and relational governance on construction disputes. The results confirmed that the institutional environment, contract governance, and relational governance each exert significant negative effects on construction disputes. Among these, contract governance has the greatest impact, followed by the institutional environment, while relational governance has the lowest effect. Furthermore, contract governance and relational governance serve as mediators between the institutional environment and construction disputes, confirming that the institutional environment has a significant positive influence on both forms of governance. This includes the shaping and empowering roles of the institutional environment on contract governance, as well as its foundation for the development of healthy relational governance. The main contributions of this study to the knowledge system include the development of a comprehensive and systematic theoretical model for construction dispute governance, as well as the identification of the roles of the institutional environment, contract governance, and relational governance in dispute resolution. These findings enrich the research in project governance and institutional environment theories.